Which of the following transactions causes a decrease in stockholders' equity?
A)Pay dividends to stockholders.
B)Obtain cash by borrowing from a local bank.
C)Provide services to customers on account.

Question

Quizplus · Accepted Answer

Paying dividends to stockholders reduces the retained earnings, which is a component of stockholders' equity. Obtaining cash by borrowing from a local bank increases liabilities and does not affect stockholders' equity. Providing services to customers on account increases both assets and equity (specifically, the accounts receivable and revenue accounts).

Which of the Following Transactions Causes a Decrease in Stockholders