The Advantage of Debiting a Cash Dividend Account, Instead of Retained

question 61

Multiple Choice

The advantage of debiting a Cash Dividend account, instead of Retained Earnings, is that

• A) no closing entry is required at the end of the accounting period.
• B) it allows users to pay the dividends much earlier.
• C) it makes it easy to keep track of the dividends declared.
• D) Cash Dividend is permanent account whereas Retained Earnings is a temporary account.

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Definitions:

Asset

Resources with economic value owned by an individual, corporation, or country, expected to provide future benefits.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the amount of income subject to income tax.

Repayment

The act of paying back borrowed money, usually with interest, over a period of time according to a predetermined schedule.

Dividends

A share of a corporation’s profits distributed regularly, usually every three months, to its stockholders.