What is the closing entry in the declaration of dividends?

The closing entry in the declaration of dividends involves transferring the total amount of declared dividends from the Retained Earnings account to the Dividends Payable account. This entry reflects the company's obligation to pay the declared dividends to shareholders. Once the dividends are paid, the Dividends Payable account is then closed by debiting it and crediting the Cash or Bank account. This process ensures that the financial records accurately reflect the company's distribution of earnings to its shareholders.