To determine the effect of dividends paid on a company's financial statements, let's analyze each option in detail:

1. **Dividends do not decrease revenues** - Dividends are distributions of a company's earnings to shareholders and are not considered an expense that affects revenue accounts. Therefore, option (a) is incorrect.

2. **Dividends do decrease equity** - When a company pays dividends, it reduces the retained earnings component of shareholders' equity. This means that option (b) is correct because dividends represent a return of profits to shareholders.

3. **Dividends do not increase liability** - Paying dividends does not create a liability; instead, it is a distribution of existing equity. Thus, option (c) is incorrect.

4. **Dividends do not increase expenses** - Like revenues, dividends are not classified as an expense. They simply reflect the distribution of profits. Hence, option (d) is also incorrect.

### Final Answer
The correct answer is **b. decrease equity**.

Question

To determine the effect of dividends paid on a company's financial statements, let's analyze each option in detail:

1. **Dividends do not decrease revenues** - Dividends are distributions of a company's earnings to shareholders and are not considered an expense that affects revenue accounts. Therefore, option (a) is incorrect.

2. **Dividends do decrease equity** - When a company pays dividends, it reduces the retained earnings component of shareholders' equity. This means that option (b) is correct because dividends represent a return of profits to shareholders.

3. **Dividends do not increase liability** - Paying dividends does not create a liability; instead, it is a distribution of existing equity. Thus, option (c) is incorrect.

4. **Dividends do not increase expenses** - Like revenues, dividends are not classified as an expense. They simply reflect the distribution of profits. Hence, option (d) is also incorrect.

### Final Answer
The correct answer is **b. decrease equity**.

Knowee AI · Accepted Answer

To determine the effect of dividends paid on a company's financial statements, let's analyze each option in detail:

1. **Dividends do not decrease revenues** - Dividends are distributions of a company's earnings to shareholders and are not considered an expense that affects revenue accounts. Therefore, option (a) is incorrect.

2. **Dividends do decrease equity** - When a company pays dividends, it reduces the retained earnings component of shareholders' equity. This means that option (b) is correct because dividends represent a return of profits to shareholders.

3. **Dividends do not increase liability** - Paying dividends does not create a liability; instead, it is a distribution of existing equity. Thus, option (c) is incorrect.

4. **Dividends do not increase expenses** - Like revenues, dividends are not classified as an expense. They simply reflect the distribution of profits. Hence, option (d) is also incorrect.

### Final Answer
The correct answer is **b. decrease equity**.

Dividends paid: a. decrease revenues. b. decrease equity. c. increase liability. d. increase expenses.

Question

Dividends paid:

Solution

Final Answer

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