The ultimate effect of incurring an expense is a reduction in shareholders' equity. The declaration of a cash dividend also reduces shareholders' equity. Explain the difference between an expense and a cash dividend and explain why they have the same effect on shareholders' equity.

Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter14: Corporation Accounting
Section: Chapter Questions
Problem 14MC: Which of the following is true of a stock dividend? A. It is a liability. B. The decision to issue a...
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The ultimate effect of incurring an expense is a reduction in shareholders' equity. The declaration of a cash dividend
also reduces shareholders' equity. Explain the difference between an expense and a cash dividend and explain why
they have the same effect on shareholders' equity.
Transcribed Image Text:The ultimate effect of incurring an expense is a reduction in shareholders' equity. The declaration of a cash dividend also reduces shareholders' equity. Explain the difference between an expense and a cash dividend and explain why they have the same effect on shareholders' equity.
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