Final answer:
Only dividends paid are reported on the statement of cash flows as they represent actual cash flow from the company. Dividends declared are recorded in the equity section of the balance sheet, not the cash flow statement, since they are a commitment to pay rather than a completed transaction.
Step-by-step explanation:
The statement "Both dividends paid and dividends declared during the year are reported in the statement of cash flows" is not true. In the statement of cash flows, only dividends paid are reported because it represents an actual cash outflow during the accounting period. Dividends declared are not reported in the statement of cash flows but are noted in the equity section of the balance sheet as they represent a company's commitment to pay dividends, which impacts the reported retained earnings.
The statement of cash flows is one of the key financial statements and it provides information about the cash inflows and outflows over a certain period of time. It has three main sections: Operating Activities, Investing Activities, and Financing Activities. Dividends paid fall under Financing Activities, as they are transactions with owners and affect the company's cash balance.