Declared dividends are recognised as:
A) a reduction in share capital.
B) a reduction in retained earnings.
C) an expense
D) an asset.

Question

Quizplus · Accepted Answer

When a company declares a dividend, it is essentially distributing a portion of its earnings to shareholders. This distribution reduces the company's retained earnings, which is a component of shareholders' equity on the balance sheet. Therefore, declared dividends are recognised as a reduction in retained earnings, but not as a reduction in share capital or an expense, nor as an asset.

Declared Dividends Are Recognised As