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Case Interview Prep

Category - Accounting

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Which of the following entries would be made to close a dividends account?

Credit retained earnings
Debit retained earnings
Debit revenue
Debit depreciation expense
Debit cash

Explanation

Answer - B - To close a dividends account, a debit entry would be made to retained earnings.

Key Takeaway: Paying dividends will reduce retained earnings. Because retained earnings carries a credit balance, the debit entry will reduce the account.

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