Declaration of dividend on preference shares

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Sai krishna Medikonda (Querist)
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03 April 2009 Sir,

If a company has the loss in one financial year but it has retained earnings(profits relating to previous financial years) more than the loss then,

1) Is it compulsory to declare dividend on cumulative preference share capital?

2) Is it compulsory to declare dividend on non-cumulative preference shares?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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04 April 2009 It depends on how the retained earnings were reatined.

If you have transfered to general reserve we cannot say it is a reatined earnings.

If you have carried over in p&l account credit balance then after offsetting loss of current year if profits remains you can declare dividend.

It depends on what the policy of the company says.

Beacause the dividend will be declared from current year profits.

If the company wants retain its image it will declare dividend.

Firt dividned to be given to non cumulaive preference shares and remaining can be given to cumulative preference shares.