Understanding Dividends and Accounting Entries

Explanation:

Dividends accounting in Sunland Company: When Sunland Company paid dividends of $4800, the Dividends account was decreased by $4800. This process involves specific accounting entries in the company's financial records.

Dividends Account: When dividends are declared, a temporary account called Dividends is created. This account is a contra equity account that decreases the retained earnings account. The Dividends account has a debit balance, even though it falls under stockholders' equity.

Accounting Entries: When dividends are paid out, the following entries are typically made in the accounting records of Sunland Company: 1. Debit Retained Earnings account and credit Dividends Payable. 2. When cash is actually paid out to shareholders, debit Dividends Payable and credit Cash.

As a result, the Dividends account decreases by the amount of dividends paid out, which in this case was $4800. This process ensures that the company's financial statements accurately reflect the distribution of earnings to shareholders through dividends payments.

It's important for companies like Sunland to carefully track dividends payments and associated accounting entries to maintain accurate financial records and communicate effectively with investors and stakeholders.