Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 42 - No. 22)
What is the effect of declaring and paying a cash dividend on the accounting equation?
Increases assets, increases liabilities
Decreases assets, decreases equity
Increases assets, increases equity
Decreases assets, increases liabilities
Explanation
Paying a cash dividend decreases cash (asset) and decreases retained earnings (equity).
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