Question: What is the major accounting difference between interest incurred during a period and cash dividends declared during the same period? Interest decreases retained earnings while

What is the major accounting difference between interest incurred during a period and cash dividends declared during the same period?

  • Interest decreases retained earnings while dividend declared increases retained earnings

  • Interest reduces net income while dividends declared do not affect net income

  • Interest does not affect net income while dividends reduce net income

  • There is no major difference. Both are treated identically for accounting purposes.

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