Q. What is dividend?
One idea of the statement of retained earnings is to connect the income statement and the balance sheet. The statement of retained earnings describes the changes in retained earnings between two balance sheet dates. These changes typically consist of the addition of net income (or deduction of net loss) and the deduction of dividends. Dividends are the earnings by which a corporation rewards its stockholders owners for providing it with investment funds. A dividend is a payment typically of cash to the owners of the business it is a distribution of income to owners rather than an expense of doing business. Corporations aren't required to pay dividends and, because dividends aren't an expense they don't appear on the income statement. The effect of a dividend is to decrease cash and retained earnings by the amount paid out. Subsequently the company no longer retains a portion of the income earned but passes it on to the stockholders. Receiving dividends is obviously one of the primary reasons people invest in corporations.