Which common mistake do students make when preparing an Income Statement?

Listing dividends as expenses is a common mistake because dividends are not actually considered expenses in the context of an income statement. Instead, they are distributions of a company's retained earnings to its shareholders and appear on the statement of changes in equity or a similar financial statement, rather than on the income statement itself.

When preparing an income statement, it is crucial to differentiate between expenses, which are costs incurred in the normal course of business operations to generate revenue, and dividends, which represent a return of earnings to shareholders. Understanding this distinction helps ensure that the financial statements accurately reflect the company's profitability and operational performance, while dividends impact the equity section rather than the income generation aspect of the company.