A dividend is not an expense or a loss.
Therefore, dividends declared and/or paid are not part of the computation of net income that is presented on the income statement.
Dividends declared by corporations are reported in their statements of changes in Retained Earnings and Stockholders’ Equity.
Do dividends count as expenses?
Dividends are not considered an expense. For this reason, dividends never appear on an issuing entity’s income statement as an expense. Instead, dividends are considered a distribution of the equity of a business.
Why are dividends not considered an expense?
Because cash dividends are not a company’s expense, they show up as a reduction in the company’s statement of changes in shareholders’ equity. Cash dividends reduce the size of a company’s balance sheet and its value since the company no longer retains part of its liquid assets.
Where does dividend expense go on the income statement?
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.
Are dividends deducted from profit?
A dividend is a distribution to shareholders of retained earnings that a company has already created through its profit-making activities. Thus, a dividend is not an expense, and so it does not reduce a company’s profits. Once the cash is paid out to investors, the opportunity to generate interest income is lost.