25 March 2021
Please highlight on interim dividend(recivable) declared by the other company after the closing of accounts on at the end balance sheet date. kavan ltd has declared divdend on 10th may 2017 for theyear ended 31/3/2017, which is approved by shareholdersin AGM meeting held onn 30th june 2017. how to report it in the books a investmnet company that has invested in the kavan Ltd.
12 July 2024
When a company declares an interim dividend after the end of its financial year but before the approval in the Annual General Meeting (AGM), here’s how an investment company should treat it in its books:
### Reporting Interim Dividend Receivable from Kavan Ltd.
1. **Recording the Interim Dividend**: - As an investment company, you should record the interim dividend receivable in your books as soon as it is declared by Kavan Ltd., provided it is confirmed by the company’s board of directors. - Since Kavan Ltd. declared the dividend on 10th May 2017 for the year ended 31st March 2017, and it was approved in the AGM held on 30th June 2017, you should recognize the dividend income when it is declared by Kavan Ltd., not when it is approved in the AGM.
2. **Accounting Treatment**: - **Journal Entry**: ``` Dr. Dividend Receivable (Current Asset) Cr. Dividend Income (Revenue) ``` - Record the dividend receivable as a current asset in your balance sheet under "Dividend Receivable." - Recognize the dividend income as revenue in your profit and loss statement when the dividend is declared by Kavan Ltd.
3. **Timing of Recognition**: - The dividend income should be recognized in your financial statements for the period in which the dividend is declared by Kavan Ltd., not necessarily when it is approved in the AGM. - This ensures that your financial statements reflect the income earned during the period in which the dividend was declared by the investee company.
4. **Disclosure in Financial Statements**: - Disclose the dividend receivable under current assets in your balance sheet. - Disclose the dividend income in your profit and loss statement for the relevant accounting period.
### Conclusion
For an investment company like yours, recording interim dividends receivable involves recognizing the income when it is declared by the investee company (Kavan Ltd., in this case). Ensure your accounting reflects the correct timing and treatment of dividend income based on when it is declared by the company from which you hold investments. If you have specific reporting requirements or if the dividend is significant, it's advisable to consult with a financial advisor or accountant to ensure compliance with accounting standards and best practices.
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