Question

Canopy services paid k. Canopy, the sole shareholder of canopy services, $5,700 in dividends during the current year. The entry to close the dividends account at the end of the year is:

Answer 1

The journal entry for the dividend account will be recorded by debiting the retained earnings and crediting the dividends.

Further Explanation:

Payment of the dividend:

The dividend is paid to the shareholders of the company. The shareholders of the company invest the funds in the company and seek the return on their investment. The dividend is a type of return on the shareholders’ investment. The dividend is distributed after the payment of all the external liabilities, such as interest on loan and preference dividend. The dividend is paid out of the net profit of the company.

Closing entry for the dividend account:

The closing entry removes all the nominal accounts and determines the net profit and transfers it to the owner’s equity. In the current case, the dividend is an expense and has a debit balance. Therefore, it should be credited to close the account, and the contra account (Retained earnings) should be debited.

 

Thus, journal entry for the dividend account will be recorded by debiting the retained earnings and crediting the dividends.

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Answer Details:

Grade: Middle school

Chapter: Journal entries

Subject: Accounting  

Keywords: Canopy, services, Canopy, sole shareholder, canopy, services, dividends, during, current year, entry, close, account, end, year.

Answer 2

The entry to close the dividends account at the end of the year:

It is given that Canopy services paid k. Canopy, the sole shareholder of canopy services, $5,700 in dividends during the current year. The entry to close the dividends account at the end of the year shall be as follows:

Dec. 31, Year;

Retained earnings Debit  $5,700

Dividends              Credit                $5,700

(Being dividends closed to retained earnings)