What is the effect on the accounting equation when cash dividends are declared? What is the...
What is the effect on the accounting equation when cash dividends are declared? What is the effect on the accounting equation when cash dividends are paid? Please explain.
Homework Answers
What is the effect on the accounting equation when cash dividends are declared? What is the effect on the accounting equation when cash dividends are paid?
Answer -
When cash dividends are declared, a Current liability increases (Dividends Payable is credited) and Stockholder's equity decreases (Retained Earnings is debited).
When cash dividends are paid, there is a decrease in both Assets (Cash) and Liabilities (Dividends Payable).
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