Cash dividends reduce both cash and retained earnings by the amount of the dividends paid.

Name: Cash dividends reduce both cash and retained earnings by the amount of the dividends paid.
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Question

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Cash dividends result in a decrease in the cash account (an asset) and a decrease in the retained earnings account (an equity account) by the amount of the dividends paid, reflecting the distribution of earnings to shareholders.

Cash Dividends Reduce Both Cash and Retained Earnings by the Amount