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

3. Accrual Accounting Concepts

Closing Entries

Financial Accounting

3. Accrual Accounting Concepts

Closing Entries

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Multiple Choice

Which of the following is the correct fourth closing entry to close the Dividends account to the Retained Earnings account?

Debit Dividends; Credit Retained Earnings

Debit Retained Earnings; Credit Income Summary

Debit Dividends; Credit Income Summary

Debit Retained Earnings; Credit Dividends

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Verified step by step guidance

Understand the purpose of closing entries: Closing entries are used to transfer balances from temporary accounts (like revenues, expenses, and dividends) to permanent accounts (like Retained Earnings) at the end of an accounting period.

Identify the role of the Dividends account: Dividends represent distributions to shareholders and reduce Retained Earnings. Therefore, the Dividends account must be closed to Retained Earnings.

Determine the correct accounts to debit and credit: To close the Dividends account, you need to debit the Dividends account (to reduce its balance to zero) and credit the Retained Earnings account (to reflect the reduction in equity).

Eliminate incorrect options: Review the provided options and eliminate those that involve incorrect pairings, such as closing Dividends to Income Summary or reversing the debit/credit relationship.

Select the correct entry: Based on the analysis, the correct fourth closing entry is 'Debit Dividends; Credit Retained Earnings,' as this properly transfers the balance from Dividends to Retained Earnings.