Final answer:
The dividends account is closed to retained earnings by being credited at the end of an accounting period. It is a temporary account used by corporations to record distributions made to shareholders. The correct answer to the student's question is option 'b'.
Step-by-step explanation:
The student's question pertains to the process of closing the dividends account at the end of an accounting period. When a company earns profits, it may choose to distribute a portion of those profits as dividends to its shareholders. The dividends account records these distributions. At the end of the accounting period, the balance in the dividends account is closed to the retained earnings account. This is done by crediting the dividends account and debiting the retained earnings account. As for the choices presented in the question:
- a) Closed to retained earnings by being debited is incorrect because the dividends account is credited, not debited, when closed.
- b) Closed to retained earnings by being credited is the correct answer, as this is how you close the dividends account.
- c) Used for partnerships is incorrect because the dividends account is specific to corporations.
- d) A real account is incorrect; the dividends account is a temporary account, not a real (permanent) account.
Thus, the correct action at the end of an accounting period for a dividends account is to close it by crediting the account, hence, the correct answer to the student's question is option 'b'.