The dividends declared and paid by a corporation will be reported as a use of cash in the financing section of the statement of cash flows. Dividends are also reported on the statement of changes in stockholders’ equity.

Dividends on common stock are not reported on the income statement since they are not expenses. Dividends on preferred stock are not expenses, but will be deducted from net income in order to report the earnings available for common stock on the income statement.

Since the balance sheet reports only the ending account balances at an instant of time, the Cash and Retained Earnings amounts reflect the balances after past dividends and other transactions.

Learn more about Stockholders’ Equity.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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