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

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

What is the classification and normal balance of the Dividends account?

Equity account with a credit balance

Asset account with a credit balance

Contra-equity account with a debit balance

Liability account with a credit balance

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Verified step by step guidance

Understand the concept of the Dividends account: Dividends represent distributions of earnings to shareholders and reduce retained earnings, which is part of equity.

Learn the classification of the Dividends account: Dividends are classified as a contra-equity account because they reduce the equity balance.

Understand the normal balance of a contra-equity account: Contra accounts typically have a balance opposite to the account they offset. Since equity accounts normally have a credit balance, a contra-equity account like Dividends will have a debit balance.

Review the options provided: Analyze each option to determine which matches the classification and normal balance of the Dividends account.

Select the correct answer: Based on the analysis, the Dividends account is a contra-equity account with a debit balance.