Dividends payable refers to what type of account?

Dividends payable is classified as a liability account for unpaid declared dividends. When a company declares dividends, it creates an obligation to pay those dividends to shareholders. Until the payment is made, the amount owed is recorded as a liability on the balance sheet. This account indicates the company's commitment to distribute profits to its shareholders, reflecting amounts that are currently owed but not yet paid. Consequently, this is an important aspect of financial reporting, as it distinguishes between profits earned and those actually distributed to shareholders.

Understanding this classification is essential for assessing a company's financial obligations and overall financial health. The other choices do not accurately represent dividends payable. For instance, an asset account for dividends received would imply an amount the company expects to receive, while equity accounts for retained earnings reflect profits that have been reinvested in the company, not amounts owed to shareholders. A revenue account for dividend income would pertain to earnings generated from investments in other companies, not the company's own declared dividends to shareholders.