[student007]

If a company sold $200 shares to investors, and someone recorded this (incorrectly):
Dr. Cash
Cr. Revenue

What is the correct entry? How can I reverse this incorrect entry?

This is what I did:
Dr. Revenue
Cr. Capital Stock

If correct, how would I be able to explain my reasoning?

I have one more situation:

A company paid $100 Dividends to shareholders. The incorrect entry was:
Dr. Dividend Expense
Cr. Cash

What's the mistake here? How do I reverse this?

This is what I think:
Dr. Retained Earnings
Cr. Dividend Expense

If correct, how would I be able to explain my reasoning?
Thanks

[CaptainForest]

You did Problem 1: $200 Capital Sotck Correctly.

Problem 1: $200 Capital Stock

You did it correct.

How would you explain it?
What was incorrectly done was
Dr. Cash
Cr. Revenue

What was suppose to be done was
Dr. Cash
Cr. Capital Stock.

What you need to do to fix this. Since Revenue should not have been recorded, you must reverse that (Dr. Revenue), and since cash in debited already, all u have to do is credit capital stock.

[CaptainForest]

Problem 2: $100 Dividends

When a company declares their intention to pay a dividend, the Journal Entry is:

Dr. Dividend Declared or Retained Earnings
Cr. Dividend Payable

When they pay the dividend……
Dr. Dividends Payable
Cr. Cash


Assuming they recorded the declaration of the dividend correctly, then they should have
Dr. Dividends Payable
Cr. Cash

They did Cr. Cash, but instead of Dr. Dividends Payable, they Dr. Dividends Expense.

So, they need to…
Dr. Dividends Payable
Cr. Dividends Expense

[student007]

Would it be possible to instantaenously declare and pay dividends, that is, is there any situation where:
Dr. Retained Earnings
Cr. Cash
Would be correct?

[CaptainForest]

It might be possible for a private corporation.

However, for any PUBLIC corporation (something that trades its stocks on a stock market like NYSE), you cannot. You must have a Declaration Date, Date of record and Date of payment.