Definition of Dividend
A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings, profits). The dividend is not an expense or a loss. Therefore, the dividends declared and/or paid are not part of the calculation of the corporation’s net income that is reported on its income statement.
Example of Dividend Reporting
While dividends do not reduce the corporation’s net income reported on the income statement, the dividends do reduce the corporation’s retained earnings and stockholders’ equity. The dividends are reported on the corporation’s statement of stockholders’ equity, one of the required financial statements which summarizes the changes in stockholders’ equity.
