How to record dividends transactions

Assume that you are the company who will issue a cash dividends. Upon declaration of the cash dividinds you should debit retained earnings and credit dividinds payable. And When you pay the dividinds you should debit dividinds payable and credit cash.

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Originally Posted by hamzashakaa

Assume that you are the company who will issue a cash dividends. Upon declaration of the cash dividinds you should debit retained earnings and credit dividinds payable. And When you pay the dividinds you should debit dividinds payable and credit cash.

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Thanks, I already posted the same question with what I think is the appropriate Journal Entry, I comapre with your answer, we agree, the only difference is I used dividends as a Retained Earnings contra-account instead of Retained Earnings. I do so to show what causes the change on the Retained Earnings.

Comments

Yes you are right it should be a contra account.