Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 24 - No. 31)
What is the effect of declaring and paying dividends on a company's financial statements?
Decreases cash.
Decreases retained earnings.
Increases liabilities.
Increases equity.
Explanation
Dividends are paid in cash (a decrease in cash) and reduce retained earnings (a component of equity).
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