Debits increase assets, decrease liabilities and shareholders' equity.
Credits decrease assets, increase liabilities and shareholders' equity. Debits must equal credits. XX Dividends Payable XX Payment , Dividends Payable XX Cash XX Close , Retained Earnings XX Dividends Declared XX 3. To measure performance for the period, account balances must be zero at the beginning of the period. So accountants developed a method of closing the accounts at the end of the period.