Why does the distribution of cash dividends to investors lead to a decrease in owners equity?

Cash dividends are retained earnings.

retained earnings include surplus reserves.

and undistributed profits, while retained earnings are owner's equity.

As a result, dividends lead to a decrease in retained earnings, so owner's equity decreases.

Owner's equity refers to the residual equity enjoyed by the owner after deducting liabilities from the assets of the enterprise. Including paid-up capital.

or share capital), capital reserve.

Surplus reserves and undistributed profits. In joint-stock enterprises, it is also called shareholders' equity. Owner's equity is the net assets of the enterprise investors to the enterprise.

Ownership. It is subject to changes in total assets and total liabilities. Owner's equity consists of the owner's share of the profits of the business in proportion to the amount of their capital contribution.

At the same time, the owner must also bear the operational risks of the enterprise with the amount of his capital contribution. Owner's equity also means that the owner has the legal right to manage the business and delegate the management of the business to others.

Cash dividends are drawn from retained earnings, which decreases, whereas retained earnings are owner's equity, resulting in a decrease in owner's equity.

Extended Materials. 1. Why does the distribution of cash dividends to investors lead to an increase in liabilities?

The distribution of dividends shall be divided into two stages, the first stage, when the general meeting of shareholders approves the dividend distribution plan.

Debit: Profit distribution - undistributed profit.

Credit: Dividends payable - by shareholder.

In the second stage, dividends will be distributed to shareholders.

Borrow: Dividends payable - by shareholder.

Credit: bank deposits, etc.

Imagine that if the distribution of dividends is not completed in the same accounting period (month, quarter, year), then there is a possibility of an increase in liabilities, and if it is completed in the same accounting period, there will be a simultaneous increase and decrease in liabilities, which will not affect liabilities.

Why should dividends be distributed first? I think it should be to facilitate future audits, for example, if you want to check how many dividends the shareholder distributed that year, don't you know at a glance the dividends payable by the shareholder unit as soon as you check it!

2. Why does the declaration of dividends to shareholders lead to an increase in total liabilities?

Because after the profit is distributed, the profit decreases, the dividend payable will increase, and the interest payable on the share will increase in the liability category, which will of course increase the total debt. Or the payment of dividends payable to shareholders also reduces profits and at the same time reduces monetary funds.

If the profit in the owner's equity category decreases, the proportion of liabilities will increase accordingly.

Dividend distribution is the distribution of dividends by the company to shareholders, which is part of the profit distribution of the enterprise, and the dividend belongs to the company's net profit after tax. Assignment.

Cash dividends are drawn from retained earnings, which decrease, while retained earnings are owner's equity.

Resulting in a decrease in owner's equity.

Because the profit distribution becomes smaller, the profit distribution is an owner's equity account.

Wrong. Distribution of cash dividends to investors, resulting in a decrease in owners' equity.

If you look at the entries, you will understand, borrowing: profit distribution - cash dividends payable.

Credit: Dividends payable.

Borrow: Dividends payable.

Credit: Bank deposits.

After the announcement of the distribution of profits to investors, the following entries will be prepared by the financial department.

Debit: Profit distribution - undistributed profit.

Credit: Dividends payable.

The profit distribution account is a component of the owner's equity, and the decrease in profit distribution will inevitably lead to the reduction of the owner's equity.

Extended Information: Profit distribution accounts are an integral part of the owner's equity. A decrease in the distribution of profits inevitably leads to a decrease in owners' equity.

1. The situation is as follows:

1.Capital reduction refers to the reduction of paid-up capital, thereby reducing owners' equity.

2.Dividends are declared.

2. Reasons for the decrease in owners' equity.

1.Investor divestment.

2.Operating losses of businesses and corporations.

3. Consumer Rights and Interests.

1.Consumer rights and interests refer to the rights and interests that consumers enjoy in accordance with law for a certain period of time in the future after obtaining goods or receiving services and receiving compensation.

2.Consumer rights and interests are the rights granted to the end users of commodities in order to meet the objective needs of economic operation under certain social and economic relations.

On March 15, John F. Kennedy, the former U.S. **, delivered a special speech on protecting the interests of consumers in Congress, and for the first time proposed the famous "four rights" of consumers, namely: the right to safety; the right to obtain accurate information; the right to discretion; The right to put forward consumer opinions. 315 marked the gradual recognition of the four rights proposed by Kennedy by consumer organizations around the world, and was adopted as the most basic goal of work.

4.Since 1983, consumer organizations around the world have held 315 days of large-scale events each year to promote consumer rights.

Owner's equity refers to the residual equity enjoyed by the owner after deducting liabilities from the assets of the business. The owner's equity of a company is also known as shareholders' equity. Owner's equity is the owner's residual claim to the assets of the business.

It is the portion of the assets of the business that the owner should enjoy after deducting the creditor's rights. It not only reflects the preservation and appreciation of the owner's invested capital, but also reflects the concept of protecting the rights and interests of creditors.

The ** of owner's equity includes the capital invested by the owner, other comprehensive income, retained earnings, etc., and usually includes equity (or paid-up capital), capital reserve (including equity premium or capital premium, other capital reserve), surplus reserve, and undistributed profits.

The capital invested by the owner refers to the capital invested by the owner in the business. It includes not only the amount that constitutes the registered capital or share capital of the enterprise, but also the amount of invested capital in excess of the registered capital or share capital, i.e., the capital premium or equity premium. This part of the invested capital is reflected as capital reserve (capital premium).

Other comprehensive income refers to the profits and losses that are not included in the profit or loss for the current period in accordance with the accounting standards.

Retained earnings refer to the internal accumulation of enterprises extracted or formed from the profits realized over the years, including surplus reserves and undistributed profits.

Because the first step in the distribution of profits to investors accounting entries is: debit: profit distribution - undistributed profits.

Credit: Dividends payable.

This dividend payable is calculated from the distribution of profits, which will reduce the owner's equity. And then when the actual distribution is made, the assets and liabilities are reduced at the same time:

Borrow: Dividends payable.

Credit: Bank deposits.

Because in the financial statements, the owner's equity represents the investor's profit, and if you make a profit distribution, then the owner's equity will be reduced. Therefore, it is normal to reflect a decrease in owners' equity in the financial statements.

This is because the accounting entries show that the undistributed profits have been converted into liabilities. Owners' equity decreases and liabilities increase.

It can be understood this way.

In addition, it is simple and popular to understand that money is given to others, and the rights and interests must be reduced.

Undistributed profit is an important part of owner's equity, and a decrease in undistributed profit will result in a decrease in owner's equity.

Because the undistributed profits are to be transferred to the dividends payable.

Debit: Profit distribution - undistributed profit.

Credit: Dividends payable.

The owner takes his share of the profits. It is distributed to the consumer, so his funds become less.

When an enterprise announces the distribution of cash dividends to investors, it indicates that the dividends payable by the enterprise have increased, and the dividends payable are liabilities and the increase is credited; At the same time, due to the payment of dividends, the profits of the enterprise are reduced, and the profits are distributed.

It is an owner's interest.

class, which is debited less.

The entries are:

Borrow; Profit distribution – dividends payable; Dividends payable.

Extended Materials.

Accounting

The so-called accounting is to unify the various economic operations useful to an enterprise into a unit of measurement.

Through a series of procedures such as bookkeeping, accounting, and reporting, it provides economic information that reflects the financial status and operating results of the enterprise.

Accounting is based on currency as the main unit of measurement, using special methods for enterprises and government agencies.

or the economic activities of other economic organizations to reflect and supervise continuously, systematically, and comprehensively an economic management activity. Specifically, accounting is the accounting and supervision of the economic activities of a certain entity, and providing accounting information to relevant parties.

Accounting objectives, also known as accounting objectives, are tasks or standards that are required to be completed by accounting work, also known as financial reporting objectives.

China's "Accounting Standards for Business Enterprises.

in accounting.

The objective of accounting is clearly defined: the goal of accounting is to provide users with information about the financial position, operating results and cash flow of the enterprise.

and other relevant accounting information, reflecting the performance of the fiduciary responsibilities of the management of the enterprise, which is helpful for users of financial reports to make economic decisions.

Participate in business decisions.

Decision-making is the process of selecting the best solution from a variety of options to achieve maximum economic benefits. Decision-making plays an important role in modern management, correct decision-making can enable enterprises to obtain the maximum benefits, and decision-making errors will cause heavy losses and waste. Decision-making must be based on science, and decision-making requires a large amount of financial information, which must rely on accounting to provide.

Therefore, the function of participating in decision-making, which lays the foundation for enterprises to achieve maximum economic benefits, is an important function of accounting.

Accounting treatment when declaring the distribution of cash dividends:

Borrow: Profit Distribution – Distribution of cash dividends.

Credit: Dividends payable – cash dividends.

Dividends payable are liabilities, and the credit means that the liabilities have increased.

At the time of distribution: borrow: dividends payable - cash dividends.

Credit: Bank Wang Qing deposit.

Liabilities are reduced, and assets are reduced.

The announcement of the distribution of dividends of 10 million yuan means that 10 million yuan of the company's undistributed profits will be distributed to investors. In this way, the dividend payable increases by 10 million yuan, which means that the debt increases.

The decrease in the undistributed profits of the brigade stool before the annihilation is a decrease in the owner's equity.

Borrow: Profit Distribution - Distribution of Cash Dividends Credit: Dividends Payable The occurrence of this entry will inevitably lead to a decrease in owners' equity and an increase in liabilities, which is very obvious, and this type of question in the exam is only aimed at the business itself.

Intermediate financial accounting questions, I don't understand very well, thank you o( o Profits were originally included in the rights and interests of the owners, and the board of directors approved the cash distribution, that is, the profits were distributed to shareholders, and the reduction of profits was also a reduction in owners' equity. The board of directors will approve the distribution, and there is a process for this, and it cannot be done immediately.

The distribution of cash dividends will cause an increase or decrease in the total owner's equity because of the distribution of cash dividends, i.e., a decrease in undistributed profits, that is, a decrease in the equity of the disposed owner.

Owner's equity refers to the residual equity enjoyed by the owner after deducting liabilities from the assets of the enterprise. The owner's equity of a company is also known as the shareholders' equity. Owner's equity is the owner's residual right to claim the assets of the enterprise, and is the part of the assets of the enterprise that should be enjoyed by the owner after deducting the rights and interests of creditors, which can not only reflect the preservation and appreciation of the capital invested by the owner, but also reflect the concept of protecting the rights and interests of creditors.

Owners' equity includes paid-up capital, capital reserve, surplus reserve, and undistributed profits.

Cash dividends are dividends that are distributed to shareholders in the form of cash. From an investor's point of view, the reason for investing in ** is to obtain a generous cash dividend. From the perspective of the company's board of directors, for the development of the company, it is necessary to retain enough cash to increase equipment and replenish working capital, hoping to limit dividends to a low level.

Dividends are mainly paid in cash dividends and property dividends. Property dividends are dividends paid on assets other than cash, mainly paid to shareholders as dividends on the value of other companies owned by the company, such as bonds, etc.; Debt dividends are dividends paid in the form of liabilities, usually in the form of notes payable by the company to shareholders, and sometimes in the form of corporate bonds; Dividends are dividends paid by the company in the form of additional issuance.

For the payment of cash dividends, there must be sufficient retained earnings; also have enough cash; At the same time, there is a decision of the board of directors. Cash dividends will reduce the company's retained earnings, and after the distribution of dividends, the company's cash will decrease, and if the funds are not sufficient, additional investment may have to be through other financing channels, such as bank borrowing, which are more risky. However, from the other side, stable cash dividends have a positive effect on maintaining the best business, and the issuance of cash dividends will bring investors a signal that the business is in good condition and enhance their confidence.

The general meeting of shareholders declared a cash dividend, which reduced the undistributed profit and increased the dividend payable. This will lead to a reduction in the owner's equity. The declaration of ** dividends will not cause an increase or decrease in the owner's equity.

The declaration of ** dividends will not cause an increase or decrease in the owner's equity. Because the dividend is transferred from undistributed profits to share capital, it is still in the shareholders' equity and has no impact on the owner's equity. Whether it is the issuance of cash dividends or the issuance of dividends, it needs to go through the two steps of declared distribution and actual distribution.

The different situations formed by the two types of dividends in their respective two steps correspond to different accounting treatments and have different impacts on the total owner's equity. Owner's equity mainly includes the capital invested by the owner, gains and losses directly included in the owner's equity, retained earnings, etc. It is usually composed of share capital (or paid-up capital), capital reserve (including shareholder premium or capital premium, and other capital reserves), surplus reserve, and undistributed profits.