Declaring and paying cash dividends affects which balance sheet accounts?
A)Cash only
B)Stockholders' equity only
C)Cash and stockholders' equity
D)Cash and capital stock

Question

Quizplus · Accepted Answer

Declaring and paying cash dividends reduces the amount of cash held by the company, which is reflected in the cash account on the balance sheet. It also reduces retained earnings, which is a component of stockholders' equity, as companies pay out a portion of their profits to shareholders. Therefore, both the cash and stockholders' equity accounts are affected by the declaration and payment of cash dividends. However, capital stock is not affected by the payment of dividends.

Declaring and Paying Cash Dividends Affects Which Balance Sheet Accounts