Dividends as equity distributions Steps:

• Dividends represent profit distributions to shareholders, not operational costs.
• They do not affect the income statement, as they are post-profit appropriations.
• In financial statements, dividends reduce accumulated profits within equity.
• The statement of changes in equity tracks these reductions under retained earnings.

Why C is correct:

• Under IFRS and GAAP, dividends are deducted from retained earnings in the statement of changes in equity, reflecting profit distribution without impacting net income.

Why the others are wrong:

• A: Finance costs are interest expenses on borrowings, not equity distributions.
• B: Administrative expenses are operating costs like salaries, unrelated to profit sharing.
• D: Share capital records initial equity issuance, unaffected by dividend payments.

Final answer: C