EQUITY 5NA PART 3

ODD one out

• share capital

• retained earnings

• dividends payable

NOT true about dividends

• contra equity

• expense

• Dr -/ Cr +

• profits distributed to shareholders

When dividends are declared

DR dividends

• CR cash at bank

• CR dividends payable

• CR cash at bank/ dividends payable

Retained earnings

• Dr +/ Cr -

• Dr -/ Cr +

SHAREHOLDERS’S Equity =

• share capital

• retained earnings

• share capital + retained earnings

CLOSE dividends account to

• share capital

• retained earnings

PROFIT for the year is TRANSFERRED to

• share capital

• retained earnings

To CLOSE dividends

• DR retained earnings CR dividends

• DR dividends CR retained earnings

To TRANSFER profit to retained earnings

• DR retained earnings CR income summary

• DR income summary CR retained earnings

Retained earnings may have a NEGATIVE (DR) balance

• TRUE

• FALSE