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Are dividend payments shown as an expense on the income statement?

Author:
Harold Averkamp, CPA, MBA

Definition of Dividend Payments

The cash dividends paid to stockholders are a distribution of the corporation’s earnings. Dividends are not an expense (or loss) of the corporation, and will not be reported as one of the expenses on the corporation’s income statement.

Examples of Dividend Payments

The cash dividends on a corporation’s common stock are not reported on the corporation’s income statements as an expense.

Cash dividends on a corporation’s preferred stock (if any) are not reported as expenses. However, cash dividends on the preferred stock will appear on the corporation’s income statement as a subtraction from the corporation’s net income. This is necessary to report the earnings available for common stock. When the earnings available for common stock is divided by the weighted-average number of shares of common stock, the resulting earnings per share will appear on the income statement.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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