Question

(Ch. 10)

Dividends payable is a __________ account with a normal ___________ balance and is recorded on the __________ date

Answer 1

Dividends payable is a liability account with a normal credit balance and is recorded on the declaration date when a company commits to paying out dividends to shareholders.

Step-by-step explanation:

Dividends payable is a liability account with a normal credit balance and is recorded on the declaration date. When a company earns profits, it may choose to distribute a portion of those profits to shareholders in the form of dividends. This distribution is formally announced by the company's board of directors on the declaration date, at which point the company incurs a legal obligation to pay the dividends. As a result, it records the expected payout in a dividend payable account, which increases with a credit because it represents a liability, or an amount the company owes to shareholders.