Final answer:
The statement that dividends have a normal debit balance and decrease the value of equity is false. Dividends have a credit balance, and when declared, they signify an obligation to pay shareholders, therefore reducing the company's equity.
Step-by-step explanation:
The statement that dividends have a normal debit balance and decrease the value of equity is false. In accounting, dividends have a normal credit balance. When a company declares a dividend, it is acknowledging a part of its earnings that will be distributed to shareholders. This creates a dividend payable account which is a liability on the balance sheet, reflecting an obligation of the company to pay its shareholders. Once paid, it reduces the value of equity because the company is distributing a part of its earnings rather than reinvesting or retaining it within the company. However, the declaration of the dividend itself, which would occur before the cash payment, involves a credit to the dividends payable account and a debit to retained earnings which reduces equity on the balance sheet.