CHAPTER 10 - DIVIDENDS

 Retained Earnings (RE)

• Part of owner's equity

• Shows the total profits kept in the company since it started

• Increased by net income

• Decreased by net loss or dividends

 Two Kinds of Retained Earnings

1. Free / Unappropriated – can be given out as dividends
   
   

2. Appropriated – saved for a special purpose (e.g., expansion); not for dividends

What Affects Retained Earnings?

1. Net Income or Loss

• Net Income = Revenue − Expenses
  (More income = RE goes up)
  (Loss = RE goes down)
  
  

2. Dividends

• Payments to shareholders from profits

• Declared only if there are enough retained earnings
  
  

Important Dividend Dates:

• Declaration Date – Board announces dividend; liability is recorded

• Record Date – Cut-off to know who gets the dividend

• Payment Date – When dividend is paid or shares given
  
  

Formula for Outstanding Shares:
Outstanding Shares = Issued Shares − Treasury Shares + Subscribed Shares + Share Dividends Distributable

💵 Types of DividendsCash Dividend

• Paid in money
  
  

• Formula:
  Cash Dividend = Outstanding Shares × Dividend per Share
  
  

Share Dividend (Bonus Shares)

• Paid in extra shares
  
  

• Small Share Dividend: < 20%
  
  

Large Share Dividend: > 20%