Which of the following statement is true? 1. Profits distributed to the owners are called dividends....

Which of the following statement is true?

1. Profits distributed to the owners are called dividends.

2. The income statement shows assets, liabilities, and profits of a company

3. Diviends are an expense and are reported on the income statement as a deduction from net income

4. The income statement reports the cash deposits and cash withdrawals.

Solutions

Expert Solution

The Answer is “1. Profits distributed to the owners are called dividends “

Profits made by the company from their business distributed to the owners of the company are called as Dividends. If a company earned net income, they can either distribute the earnings either to owners of the company or can retain it for some other business purposes.

The income statement shows assets, liabilities, and profits of a company – FALSE

Only the Balance Sheet shows assets, liabilities, and profits of a company where as the income statement shows net income earned by the company during the particular financial year ended.

Dividends are an expense and are reported on the income statement as a deduction from net income – FALSE

Dividends on common stock are not reported as an expense on the income statement as a deduction from net income since they are not expenses but it would be deducted from net income in order to report the earnings available for common stockholders

The income statement reports the cash deposits and cash withdrawals – FALSE

The income statement reports the net income earned during the particular financial year

ekkarill92 answered 1 year ago

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