When a corporation declares a dividend on its common stock, it will credit a current liability account Dividends Payable and will debit either 1) Retained Earnings, or 2) Cash Dividends Declared. Cash Dividends Declared is a balance sheet account, but it is a temporary account. The reason it is a temporary account is that its debit balance will be closed to the Retained Earnings account before the end of the accounting year.
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