If dividends are declared and paid in the same accounting period, what is the net effect on the accounting equation?
A)A decrease in retained earnings and an increase in expenses.
B)A decrease in cash and an increase expenses.
C)A decrease in cash and an increase in retained earnings.
D)A decrease in cash and a decrease in retained earnings.

Question

Quizplus · Accepted Answer

Declaring and paying dividends results in a decrease in cash (an asset) and a decrease in retained earnings (an equity component), as dividends are distributions of earnings to shareholders and do not affect expenses.

If Dividends Are Declared and Paid in the Same Accounting