A company declared and paid dividends of $1,300. How does this transaction affect the accounting equation?
A.Add $1,300 to Dividends and add $1,300 to Accounts Receivable.
B.Add $1,300 to Revenue and add $1,300 to Cash.
C.Add $1,300 to Dividend Expense and subtract $1,300 from Cash.
D.Subtract $1,300 from Retained Earnings and subtract $1,300 from Cash.
Correct option is D. Subtract $1300 from retained earnings and subtract $1300 from cash.
Explanation:
Journal entry for Dividend declared:
Retained earnings Account .... Debit $1300
Dividend payable Account .... Credit $1300
Journal entry for Dividend paid:
Dividend payable Account .... Debit $1300
Cash Account .... Credit $1300
Ultimately this entry will impact on Accounting equation is reduced retained earnings by $1300 and reduce cash by $1300.
A company declared and paid dividends of $1,300. How does this transaction affect the accounting equation?...
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