Dividends & Interest

Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and, therefore, dividends do not reduce the corporation’s net income or its taxable income.

“When a dividend of $100,000 is declared and paid, the corporation’s cash is reduced by $100,000 and its retained earnings (part of stockholder’s equity) is reduced by $100,000.”

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