Which of these is not a part of equity? Group of answer choices 1.General reserve. 2.Retained earnings. 3.Contributed equity. 4.Dividends payable.
Question
Which of these is not a part of equity? Group of answer choices
1.General reserve.
2.Retained earnings.
3.Contributed equity.
4.Dividends payable.
Solution
The answer is:
- Dividends payable.
Dividends payable is not a part of equity. Dividends payable represents the amount of dividends declared by a company that have not yet been paid to shareholders. It is a liability because it represents an obligation of the company to distribute the dividends to the shareholders.
Equity, on the other hand, represents the ownership interest in a company. It includes contributed equity, which is the amount of capital contributed by shareholders, general reserve, which is a reserve created from profits for various purposes, and retained earnings, which are the accumulated profits of the company that have not been distributed as dividends.
Therefore, option 4 is the correct answer.
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