Definition of Dividends
Cash dividends are a distribution of a company’s profits.
Financial Statements of a Corporation
The main financial statements of a corporation are:
- income statement
- statement of comprehensive income
- balance sheet
- statement of cash flows
- statement of stockholders’ equity
Where Dividends Appear on the Financial Statements
The dividends declared and paid by a corporation in the most recent year will be reported on these financial statements for the recent year:
- statement of cash flows as a use of cash under the heading financing activities
- statement of stockholders’ equity as a subtraction from retained earnings
Dividends that were declared but not yet paid are reported on the balance sheet under the heading current liabilities.
Dividends on common stock are not reported on the income statement since they are not expenses. However, dividends on preferred stock will appear on the income statement as a subtraction from net income in order to report the earnings available for common stock.
