Question

where do I list divideds on financial statements

Answer 1

Unlike interest payments on debt,which are charge against profits of the year, dividends are appropriation of after-tax income , before accumulating as additions to retained earnings.

This holds good for both equity & preference dividend--for the latter,irrespective of cumulative or non-cumulative.

Dividends payments (timing & rate) are decided by the Board of Directors ,but approved by the shareholders.

Portions of net income are paid as dividends & the balance of the year's earnings are retained within the company as Retained Earnings , for use within the business.

Normally dividend expense is recorded as follows:

On declaration date :

Debit      Retained Earnings

Credit     Dividends payable

On payment date:

Debit       Dividends payable

Credit       Cash

As it is only an allocation of after-tax profits, it passes through the Retained Earnings account only-----irrespective of it being cash dividend or stock dividend.

So, dividends should be listed /adjusted (against)in the Retained Earnings account, before entering the balance sheet figure , for the same.

On the asset side, cash would have reduced (gone out)--- a credit entry.

On the liability side, retained earnings are reduced---- a debit entry

In the Cash Flow Statement, it is entered in the Financing Section of The Cash Flow Statement, as a cash outflow(-)