What type of account is the Dividends account?

Definition of Dividends Account

The account Dividends (or Cash Dividends Declared) is a temporary, stockholders' equity account that is debited for the amount of the dividends that a corporation declares on its capital stock. At the end of the accounting year, the balance in the Dividends account is closed by transferring the account balance to Retained Earnings. (Corporations could debit Retained Earnings directly when dividends are declared. In that case the Dividends account is not used.)

Example of Using the Dividends Account

When a corporation declares a cash dividend on its common stock, it will credit a current liability account Dividends Payable and will debit either:

Dividends is a balance sheet account. However, it is a temporary account because its debit balance will be closed to the Retained Earnings account at the end of the accounting year.

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