When a company pays a dividend on ordinary shares,it appears as
A)an expense on the income statement.
B)a reduction in the amount of retained earnings.
C)a current liability on the balance sheet.
D)dividend payments have no effect on the financial statements.

Question

Quizplus · Accepted Answer

When a company pays a dividend on ordinary shares, it is a distribution of profits to the shareholders and is accounted for as a reduction in the amount of retained earnings on the balance sheet. It is not an expense on the income statement and neither is it a current liability. Dividend payments have an effect on the financial statements as they reduce the amount of capital retained by the company.

When a Company Pays a Dividend on Ordinary Shares,it Appears