Final answer:
When a company pays $3,300 in dividends, it records a debit to Retained Earnings and a credit to Cash in the general ledger, reflecting the distribution of earnings to shareholders without affecting the income statement.
Step-by-step explanation:
When a company pays $3,300 in dividends to its stockholders, the transaction impacts two accounts in its financial statements: Retained Earnings and Cash. The accounting entry to record the dividend payment is a debit to Retained Earnings and a credit to Cash. This reflects the decrease in the company's retained earnings and the corresponding decrease in its cash balance.
The entry is made in the general ledger as follows:
- Debit: Retained Earnings $3,300
- Credit: Cash $3,300
This transaction does not affect the income statement as dividends are not an expense but a distribution of earnings. Dividends are a way for companies to provide a rate of return to their investors, as opposed to capital gains which occur when an investor sells their shares for a higher price than they bought them.