Which item is generally reported in the statement of changes in equity rather than directly as an operating expense?
Correct answer: C. Dividends declared
- A. Salaries expense
- B. Utilities expense
- C. Dividends declared
- D. Rent expense
Explanation
Dividends are distributions of profit to owners, not costs incurred to generate revenue. They reduce retained earnings through the statement of changes in equity. Salaries, utilities and rent are expenses in profit or loss.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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