The answer is the 'B' Option. Payment of the dividend decreases cash and decreases retained earnings.
Like every business transaction, this business transaction also has a dual effect.
Since in the given case, payment of the dividend is made.
This clearly means that the cash will be reduced.
Also, Retained earnings are a corporation's prior profits, less any dividends the company has previously paid.
The term "retained" accurately conveys the fact that the corporation kept those earnings rather than paying them out as dividends to shareholders.
Therefore, when payment of the dividend is made retained earnings will also be reduced.
Hence, payment of the dividend Decreases the cash & Decreases Retained earnings.
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