Are dividends expensed on the income statement?
Nope! There is no income statement impact for any type of dividend issues by a company. Dividends are paid out of retained earnings, which is part of stockholders’ equity on the balance sheet.
Dividends are not considered an operating expense because they are not required to run the business in normal course of business. Just remember that there is no income statement impact for dividends!
The visual below illustrates how dividends are paid out of retained earnings and no expense is recorded.
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