Question

Sunland Company paid dividends of $4800. As a result of this event, the Dividends account was increased by $4800. Dividends account was decreased by $4800. Cash account was increased and the Dividends account was decreased by $4800. Cash account was increased by $4800.

Answer 1

Answer:

Dividends account was decreased by $4800.

Explanation:

When dividends are declared, a temporary account called dividends is created. It is a contra equity account that decreases retained earnings account and has a debit balance (although it is included under stockholders' equity). Once the dividends are paid, this account is cancelled.  

Answer 2

Answer:

Dividends account was decreased by $4800.

Explanation:

When Sunland company pays dividends, it will raise as set of entries.

First debit Retained Earnings accountants credit Dividends Payable

Secondly when the cash is to be paid out debit Dividends Payable and credit Cash.

So in the second set of journal entries the Dividends account decreases as dividends are paid out.