Dividends are declared and paid to the company's shareholders.What effect does this transaction have on the company's accounting equation?

Question

Quizplus · Accepted Answer

When dividends are declared and paid to shareholders, it decreases the company's retained earnings (part of equity) and the company's assets in the form of cash or other assets used to pay the dividends. Therefore, the accounting equation is affected by a decrease in both assets and retained earnings.

Dividends Are Declared and Paid to the Company's Shareholders