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

When dividends are declared and paid, cash decreases because the company is paying out money, and retained earnings decrease because dividends are a distribution of earnings to shareholders.

If Dividends Are Declared and Paid in the Same Accounting