Question

If a corporation declares a 10% ordinary share dividend, the account to be debited on the date of declaration is Share Premium-Ordinary O b. Ordinary Share Dividends Distributable. e. Retained Earnings. Od Share Capital-Ordinary

Answer 1

Dividend is the sum of money that is given to the shareholders of the company out of the profit of the business. The journal entry for declaring the dividend is a debit to retained earnings account and a credit to dividend payable account respectively. Here, a credit of dividend payable account means that the liability is increased by such amount.

In the above question, the corporation declares a 10% ordinary share dividend. So, on the date of declaration date, the entry will be a debit to retained earnings and a credit to ordinary share dividend payable account respectively.

Hence, retained earnings is the correct answer.

SUMMARY:

The account debited on the declaration date of dividend is the retained earnings account.

Hence, retained earnings is the correct answer.