Question

For business purposes, dividend payments are classified as expenses.
A. True
B. False

Answer 1

Dividend payments are not classified as expenses in business; this statement is false. They are recorded in retained earnings after profits are calculated and represent a share of profits paid to shareholders.

Step-by-step explanation:

This statement is false. Dividends are a distribution of profits to shareholders and are recorded in the retained earnings account, not as an expense on the income statement. Expenses are costs incurred during the operation of a business, whereas dividends are a share of the profits paid out after the earnings are calculated. The decision of when to issue stock, pay dividends, or reinvest profits is made by the firm's management and is dependent on whether the firm is private or public.