Question

What is the major accounting difference between interest incurred during a period and cash dividends declared during the same period

Answer 1

Answer: b. Interest reduces net income while dividends declared do not affect net income

Step-by-step explanation:

The interest incurred during a period is deducted from the Net Income before tax is calculated as it is a tax deductible expense to the business.

Dividends on the other hand are not paid from the Net income and so do not affect it. They are rather paid from the Retained earnings which a company is only able to derive after the Net Income has been calculated.