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

Which of the following is the appropriate journal entry to record the declaration of cash dividends?

Debit Cash; Credit Dividends

Debit Dividends; Credit Dividends Payable

Debit Retained Earnings; Credit Cash

Debit Dividends Payable; Credit Cash

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Verified step by step guidance

Understand the concept of cash dividends: Cash dividends are distributions of a company's earnings to its shareholders, typically declared by the board of directors. The declaration of dividends creates a liability for the company until the payment is made.

Identify the accounts involved: When cash dividends are declared, the company needs to record a reduction in Retained Earnings (or Dividends account, depending on the accounting system used) and recognize a liability in the form of Dividends Payable.

Determine the journal entry format: The declaration of cash dividends involves debiting the Retained Earnings (or Dividends account) to reduce equity and crediting Dividends Payable to record the liability.

Review the options provided: Analyze each option to determine which correctly reflects the accounting treatment for the declaration of cash dividends. The correct entry should debit Retained Earnings (or Dividends) and credit Dividends Payable.

Conclude the correct journal entry: Based on the analysis, the appropriate journal entry for declaring cash dividends is 'Debit Retained Earnings (or Dividends); Credit Dividends Payable.' This reflects the reduction in equity and the creation of a liability.