The closing process is also referred to as closing the books. The closing process is the step needed to prepare accounts for a given financial statement and the beginning of the next accounting period (Williams, Haka, Bettner & Carcello, 2005) . The composition of the closing process is the transfer of account balances temporarily to the permanent accounts. The case ensures that the general ledger becomes ready for the subsequent accounting period. The closing process is made up of two objectives. First, the closing process is considered to be a mechanism that helps in the retained earnings account update in the ledger. The update is made to be equal to the balance of the end-of-period. The retained earnings amount at the beginning-of-period remains in the ledger up to a point where the retained earnings account is updated through the closing process for the period operations impact. Secondly, the closing process resets the temporary accounts such as dividends, expense, and revenue accounts. These accounts need to be zeroed out at the end of every period. The closing process is made up of four steps. The steps are such as the closing process closes any revenue account and expenses account to an income summary. Then, the closing process closes both the dividends and income summary account to retained earnings.
Dividends
Dividends are considered to be rewards distributed from the company's earnings portion and are paid to the company's shareholders. Dividends are managed and decided by the board of directors of the company, though approval of such decisions are done by the shareholders through shareholder voting rights. The issuance of dividends can be in terms of stock shares, cash payments or different property.
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Increasing expense?
Dividends are not regarded as an expense first of all. For such a reason, dividends do not appear on an income statement of an issuing entity as an expense. Instead, they are regarded as the business's equity distribution. For that reason, dividends are subtracted from the balance sheet's equity section and also subtracted from the balance sheet's cash line item. The situation leads to a reduction in the balance sheet's size. It is notable that if no declaration of dividends has been made, then the dividends are stated on the balance sheet as a current liability. Paid dividends are considered as a cash outflow in the cash flow statements.
References
Williams, J. R., Haka, S. F., Bettner, M. S., & Carcello, J. V. (2005). Financial and managerial accounting. China Machine Press.
www.investopedia.com/ask/answers/090415/are-dividends-considered-expense.asp
