Asked by Reegan Van Rooyen on Jul 08, 2024
Verified
The classification and normal balance of the dividends account is
A) an expense with a credit balance
B) an expense with a debit balance
C) a liability with a credit balance
D) stockholders' equity with a debit balance
Stockholders' Equity
Shareholders' Equity reflects the stake of owners in a company, determined by subtracting the firm's total liabilities from its total assets.
Expense
Outflows or other using up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations.
Liability
A company's legal financial debts or obligations that arise during the course of business operations.
- Recognize and sort accounts as per their standard balances (debit or credit), gaining an understanding of the normal balance concept for diverse accounts.
Verified Answer
DP
Dhruval PatelJul 13, 2024
Final Answer :
D
Explanation :
Dividends are distributions of a portion of a company's earnings to its shareholders, and are therefore classified as a reduction of stockholders' equity. Since stockholders' equity normally has a credit balance, the dividends account will have a debit balance. Therefore, the correct choice is D, "stockholders' equity with a debit balance."
Learning Objectives
- Recognize and sort accounts as per their standard balances (debit or credit), gaining an understanding of the normal balance concept for diverse accounts.