While a cash dividend reduces assets, a stock dividend only shuffles amounts between shareholders' equity accounts.

Question

Quizplus · Accepted Answer

A cash dividend is a distribution of cash from the company's assets to its shareholders, which reduces the assets of the company. On the other hand, a stock dividend is a distribution of additional shares of stock to the shareholders, which changes the composition of shareholders' equity accounts but does not affect the total amount of equity. Therefore, a stock dividend only shuffles amounts between shareholders' equity accounts.

While a Cash Dividend Reduces Assets, a Stock Dividend Only