Question

When a company declares and then pays shareholders a dividend on the same date, what is the effect on the accounting equation for that company?

a) Increase liabilities and increase assets
b) Decrease shareholders' equity and increase assets
c) Decrease assets and decrease liabilities
d) Decrease assets and decrease shareholders' equity

Answer 1

When a company declares and then pays shareholders a dividend on the same date, the effect on the accounting equation is a decrease in assets and a decrease in shareholders' equity.

Step-by-step explanation:

When a company declares and then pays shareholders a dividend on the same date, the effect on the accounting equation for that company is When a company declares and then pays shareholders a dividend on the same date, the effect on the accounting equation is a decrease in assets and a decrease in shareholders' equity.
d) Decrease assets and decrease shareholders' equity.

A dividend is a direct payment from a firm to its shareholders, reducing the company's assets as cash is paid out. At the same time, it decreases shareholders' equity as the company distributes its profits to the owners.