Where do dividends appear in the financial statements?

A dividend is a payment made to shareholders that is proportional to the number of shares owned. A dividend is not an expense to the paying company, but rather a distribution of retained earnings.

There are four components of the financial statements. The following table shows how dividends appear in or impact each one (if at all):

Type of Financial Statement	Impact of Dividends
Balance sheet	Will reduce the balance in the Cash and Retained Earnings accounts once the dividends have been paid
Income statement	Dividends have no impact here, since they are not an expense
Statement of cash flows	Reported as a use of cash in the Cash Flow from Financing Activities section
Statement of retained earnings*	Reported as a reduction in retained earnings

* Also known as the statement of changes in stockholders' equity

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