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Sagot :
The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to decrease both stockholder's equity and total assets.
What is the effect of declaration of dividends in the statement of changes in equity?
Dividends are not specifically part of stockholder equity, but the payout of cash dividends reduces the amount of stockholder equity on a company's balance sheet.
This is so because cash dividends are paid out of retained earnings, which directly reduces stockholder equity.
How are dividends treated in financial statements?
Cash or stock dividends distributed to shareholders are not recorded as an expense on a company's income statement.
Stock and cash dividends do not affect a company's net income or profit.
Instead dividends impact the shareholders' equity section of the balance sheet.
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