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

Dividends payable is recorded as a credit on the:

date of payment

date of issuance

date of declaration

date of record

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Understand the concept of dividends payable: Dividends payable is a liability account that represents the amount a company owes to its shareholders after declaring a dividend.

Learn the key dates in the dividend process: The date of declaration, date of record, and date of payment. The date of declaration is when the company formally announces the dividend and creates the liability. The date of record determines which shareholders are eligible to receive the dividend, and the date of payment is when the dividend is actually paid.

Recognize the accounting treatment on the date of declaration: On this date, the company records the liability for dividends payable by crediting the 'Dividends Payable' account and debiting the 'Retained Earnings' account. This reflects the reduction in retained earnings and the creation of a liability.

Understand why dividends payable is not recorded on the date of issuance, date of record, or date of payment: The liability is created only on the date of declaration. On the date of record, no journal entry is made, as it is simply a cutoff date for determining eligible shareholders. On the date of payment, the liability is settled by debiting 'Dividends Payable' and crediting 'Cash'.

Review the correct answer: Dividends payable is recorded as a credit on the date of declaration because this is when the company formally commits to paying the dividend and creates the liability.