Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Paying dividends to stockholders would be recorded with a:

credit to Retained Earnings and a debit to Cash

credit to Dividends and a debit to Cash

debit to Dividends and a credit to Cash

debit to Cash and a credit to Dividends

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Verified step by step guidance

Understand the concept of dividends: Dividends are distributions of a company's earnings to its shareholders, typically in the form of cash. When dividends are declared, they reduce the company's retained earnings and are recorded as a liability until paid.

Identify the accounts involved: The two accounts affected when paying dividends are 'Dividends' (or 'Dividends Declared') and 'Cash'. Dividends represent the expense or reduction in equity, while Cash represents the outflow of funds.

Determine the accounting treatment: Paying dividends involves reducing the Dividends account (debit) and reducing the Cash account (credit). This reflects the payment of dividends to shareholders and the decrease in the company's cash balance.

Apply the double-entry accounting principle: For every transaction, there must be at least one debit and one credit. In this case, debit the Dividends account to record the expense and credit the Cash account to show the outflow of funds.

Record the journal entry: The journal entry for paying dividends would be structured as follows: Debit 'Dividends' and Credit 'Cash'. This ensures the transaction is properly recorded in the company's financial statements.