Cash dividends paid by a corporation

Question

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Cash dividends paid by a corporation reduce the retained earnings of the corporation that declared the dividend. Retained earnings represent the cumulative net income of the corporation that has not been distributed as dividends to shareholders, and as such, cash dividends represent a reduction in retained earnings. The payment of cash dividends is not an expense, as it represents a distribution of earnings, rather than an outflow of resources. Similarly, cash dividends do not reduce net income, as they are distributed after net income has been determined, and do not affect this figure.

Cash Dividends Paid by a Corporation