True or false: When a corporation declares a dividend, its net Income on the income statement is reduced. True false question.TrueFalse

The statement is False.

Explanation

When a corporation declares a dividend, it does not directly affect the net income reported on the income statement. Net income is determined by revenue minus expenses for a given period. Dividends are not considered an expense – rather, they are a distribution of profit to shareholders.

When a dividend is declared, the corporation retains its net income on the income statement; however, it does affect the balance sheet. Specifically, the announcement of a dividend creates a liability for the corporation, as it reflects the amount owed to shareholders. This liability reduces retained earnings, which is part of the equity section on the balance sheet, but does not impact the net income figure reported for that period.

In summary, the declaration of a dividend influences the equity of the company while leaving net income unchanged.