Dividends Paid in Statement of Changes in Equity

Steps:

• Identify dividends as profit distributions, not expenses, so exclude income statement (option 3).
• Note dividends reduce retained earnings, affecting equity but not directly recorded in balance sheet (option 1).
• Locate recording of actual payments in statement of changes in equity (option 2), showing deduction from retained earnings.
• Confirm only option 2 captures this per IFRS/IAS 1 requirements for equity movements.

Why D is correct:

• Per IAS 1, dividends paid during the year are presented as a separate line item reducing retained earnings in the statement of changes in equity.

Why the others are wrong:

• A: Includes balance sheet, where dividends are not directly recorded—only net equity effect appears.
• B: Limits to balance sheet only, ignoring the specific recording in changes in equity.
• C: Includes income statement, but dividends are not expenses and cannot be recorded there.

Final answer: D