Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 11 - Reporting and Analyzing Stockholders' Equity - Questions: 16

Answer

The effect of cash dividend on company's Balance sheet will be that it will reduce the retained earnings and Cash with the amount of dividend distributed.

Work Step by Step

However in case of Stock dividend, the dividend declared and company's shares are distributed. Hence there is no change in Corporations balance sheet. The retained earnings are reduced and common stock is increased, keeping the total of balance sheet intact.
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