Which of the following correctly describes the recording of

Which of the following correctly describes the recording of a dividend declaration by a company\'s board of directors?

A debit to retained earnings and a credit to cash.

A debit to retained earnings and a credit to dividends payable.

A debit to additional paid-in capital and a credit to dividends payable.

A debit to cash and a credit to retained earnings.

Solution

Answer is 2

A debit to retained earnings and a credit to dividends payable.

proceed of declared dividend would be charged from retained earning so this account would be debited and a liability is created in the form of dividend payable so it would be credited