You are absolutely correct! Thank you for correcting me. I have updated the corrected screen shot in the article to reflect the correction.

Cecilia

To clear out the dividends against retained earning I believe that the entry should be opposite.

Take your example a shareholder declares and pays out a cash dividend to himself say on January 30 2007 for $35 000.

The first entry to pay the dividend would be

DR Dividends paid 35 000
CR Bank 35000

Decreases in Retained Earnings are debits,thus to clear out the Dividends paid account out to zero against retained earnings on Feb 1 2007 the entry would be

DR Retained Earnings 35 000
CR Dividends Paid 35 000

Let me know if you agree or disagree.

Thanks

Derek