Talking Cents

Our small business accountants in Melbourne explain the different types of dividends

Dividends are normally paid in cash, but they can also be paid in other forms such as shares. Our small business accountants in Melbourne identify that when dividends are distributed, they are stated as a per share amount and are paid only on issued shares. When and how a company distributes dividends is called a company’s dividend policy.

Reporting Cash Dividends

Our accountants for small business in Melbourne record dividends on two different financial statements:

• Dividends declared during the year are reported on the statement of changes in equity.
• Dividends paid during the year are reported on the statement of cash flows. Because dividends are cash outflows, they are shown as negative numbers in the financing section.

Share Dividends

A share dividend is a distribution of a company’s ordinary shares to existing shareholders.
Share dividends are declared by a company’s board of directors and our Melbourne small business accountants state these in percentage terms.

Preference Shares

Preference shares are a form of shares that receive one or more priorities over ordinary shares. Usually, preferred shareholders relinquish the right to vote in exchange for preference to dividends and preference to assets upon liquidation of the company.

For more information regarding dividends, please contact our small business accountants in Melbourne today.