Final answer:
The journal entry for a company paying a $800 cash dividend includes debiting the Dividends account and crediting the Cash account by $800, which decreases both the company's assets and equity.
Step-by-step explanation:
When a company pays out dividends, it affects its balance sheet by reducing the cash and shareholders' equity accounts. The general journal entry to record the payment of a $800 cash dividend involves two accounts: Dividends (or Dividends Paid) and Cash. Dividends is a temporary equity account that will decrease equity (Retained Earnings), while Cash is an asset account that will decrease on the asset side of the balance sheet.
The journal entry to record the transaction would be:
- Debit Dividends (or Dividends Paid) $800
- Credit Cash $800
This entry shows a decrease in the Cash account and a corresponding decrease in the equity through the Dividends account.