Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 48 - No. 49)
What is the effect on the accounting equation if a company declares and pays dividends?
Increases assets and increases liabilities.
Decreases assets and increases liabilities.
Increases assets and decreases owner's equity.
Decreases assets and decreases owner's equity.
Explanation
Paying dividends decreases cash (assets) and decreases owner's equity (retained earnings).
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