The declaration of dividends

Question

Quizplus · Accepted Answer

When a company declares dividends, it is essentially distributing a portion of its earnings to its shareholders. This means that the retained earnings of the company will decrease, as there is less money left in the company to reinvest or use for other purposes. Dividends are not an expense account on the income statement - instead, they are typically reported as a separate line item in the statement of changes in equity or in the notes to the financial statements. Dividends are not necessary for proprietorships either - the owner(s) of a proprietorship can choose whether or not to withdraw funds from the business as dividends.

The Declaration of Dividends