What is the accounting term for profits distributed to shareholders?

The accounting term for profits distributed to shareholders is dividends.

A dividend is a distribution of a corporation’s profits or accumulated retained earnings to its owners. The most familiar form is a cash payment declared for each share, but companies can also distribute additional shares, property, or other assets. A shareholder’s payment is generally proportional to the number and class of shares owned.

Dividends are not an operating expense on the company’s income statement. Instead, they reduce retained earnings within shareholders’ equity. The company first reports its profit, then its directors—or another authorized body—decide whether any portion will be distributed or kept in the business for expansion, debt repayment, or working capital.

Dividends are not guaranteed. Public companies may maintain a regular schedule, reduce a payment, cancel it, or declare a one-time special dividend. Preferred shareholders commonly have priority over common shareholders. Another common mix-up is confusing a dividend with interest: interest is generally paid to lenders under a debt agreement, while a dividend is a return distributed to equity owners.