Ipcc investment chapter
This query is : Resolved
11 November 2017
Hi,
can someone please explain me how to calculate the dividend on pre and post acquisition, an getting confused while preparing the investment account.
please explain me with dividend declaration dates??
hope my query will help others too.
thanks,
Aswin
12 November 2017
please correct me if am wrong pre acquisition dividend provided from last year profits where as post acquisition dividend provided from current year profits. my question is equity shares are bought in april and june, june shares dividend will be deducted as per acquisition dividend. please clarify me
12 July 2024
Calculating dividends, especially in the context of pre and post-acquisition of shares, involves understanding how dividends are declared, accrued, and accounted for in investment accounts. Here’s a step-by-step explanation that should help clarify the process:
### Understanding Dividend Declaration and Payment:
1. **Dividend Declaration Date**: This is the date on which the company's board of directors formally approves the dividend payment. On this date, the liability for the dividend is recorded in the company's books.
2. **Dividend Record Date**: Also known as the "ex-dividend date," this is the cutoff date set by the company. Investors who purchase shares before this date are eligible to receive the dividend. Those who buy shares on or after this date will not receive the upcoming dividend payment.
3. **Dividend Payment Date**: This is the date when the dividend is actually paid out to shareholders.
### Calculating Dividend on Pre and Post Acquisition:
#### Pre-Acquisition:
- **Dividend Accrual**: If you acquired shares before the dividend record date, you are entitled to receive the dividend.
- **Journal Entry Example**:
- On the dividend declaration date:
- Debit: Dividend Receivable (Income Statement)
- Credit: Dividend Income (Income Statement)
- On the dividend payment date:
- Debit: Dividend Receivable
- Credit: Cash (Balance Sheet)
#### Post-Acquisition:
- **Ex-Dividend Date Impact**: If you acquire shares on or after the ex-dividend date, you will not receive the current dividend. The previous owner of the shares is entitled to it.
- **Journal Entry Example**:
- No entry is typically made for dividends post-acquisition because you are not entitled to receive them.
### Example Scenario:
Let's say a company declares a dividend with the following dates:
- **Declaration Date**: March 1, 2024
- **Record Date**: March 15, 2024
- **Payment Date**: March 31, 2024
#### Calculation:
- **Pre-Acquisition (Own shares before March 15, 2024)**:
- You would accrue the dividend as income in your books.
- **Post-Acquisition (Own shares on or after March 15, 2024)**:
- You would not accrue the dividend since you are not entitled to it.
### Investment Account Treatment:
- **Pre-Acquisition**:
- Record the dividend receivable and income in your investment account.
- **Post-Acquisition**:
- No entry is made for dividends declared after the ex-dividend date of your acquisition.
### Practical Considerations:
- **Documentation**: Keep track of acquisition dates and dividend dates to accurately reflect dividend income in your financial statements.
- **Tax Implications**: Dividends are generally taxable income, so ensure proper reporting for tax purposes based on accruals.
By understanding these dates and their implications, you can accurately account for dividends in your investment accounts, ensuring compliance and clarity in financial reporting. If you have specific transactions or scenarios, consulting with a financial advisor or accountant can provide tailored guidance.
### Understanding Dividend Declaration and Payment:
1. **Dividend Declaration Date**: This is the date on which the company's board of directors formally approves the dividend payment. On this date, the liability for the dividend is recorded in the company's books.
2. **Dividend Record Date**: Also known as the "ex-dividend date," this is the cutoff date set by the company. Investors who purchase shares before this date are eligible to receive the dividend. Those who buy shares on or after this date will not receive the upcoming dividend payment.
3. **Dividend Payment Date**: This is the date when the dividend is actually paid out to shareholders.
### Calculating Dividend on Pre and Post Acquisition:
#### Pre-Acquisition:
- **Dividend Accrual**: If you acquired shares before the dividend record date, you are entitled to receive the dividend.
- **Journal Entry Example**:
- On the dividend declaration date:
- Debit: Dividend Receivable (Income Statement)
- Credit: Dividend Income (Income Statement)
- On the dividend payment date:
- Debit: Dividend Receivable
- Credit: Cash (Balance Sheet)
#### Post-Acquisition:
- **Ex-Dividend Date Impact**: If you acquire shares on or after the ex-dividend date, you will not receive the current dividend. The previous owner of the shares is entitled to it.
- **Journal Entry Example**:
- No entry is typically made for dividends post-acquisition because you are not entitled to receive them.
### Example Scenario:
Let's say a company declares a dividend with the following dates:
- **Declaration Date**: March 1, 2024
- **Record Date**: March 15, 2024
- **Payment Date**: March 31, 2024
#### Calculation:
- **Pre-Acquisition (Own shares before March 15, 2024)**:
- You would accrue the dividend as income in your books.
- **Post-Acquisition (Own shares on or after March 15, 2024)**:
- You would not accrue the dividend since you are not entitled to it.
### Investment Account Treatment:
- **Pre-Acquisition**:
- Record the dividend receivable and income in your investment account.
- **Post-Acquisition**:
- No entry is made for dividends declared after the ex-dividend date of your acquisition.
### Practical Considerations:
- **Documentation**: Keep track of acquisition dates and dividend dates to accurately reflect dividend income in your financial statements.
- **Tax Implications**: Dividends are generally taxable income, so ensure proper reporting for tax purposes based on accruals.
By understanding these dates and their implications, you can accurately account for dividends in your investment accounts, ensuring compliance and clarity in financial reporting. If you have specific transactions or scenarios, consulting with a financial advisor or accountant can provide tailored guidance.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Tax implications of gift to maternal uncle
- Filing d ITR by registered legal heir
- Closure of a PVT LTD company
- 26QB correction - no data available error for fully consumed/processed with default
- ROC filings for the first year of incorporation
- Real estate business by a partnership firm where both of the partners are SC/ST
- TDS on Purchase of Immovable Property in case of Co Owner
- When I Login E-invoice portal with waybill user id and pw, it is showing 3011 error data
- Short term capital gain Section 87A
- Restarting CA after 25 Years
- How to open attachment in 23ac xbrl
- TDS -Annual fees
- INCOME TAX AMOUNT PAID BUT NOT REFLECTING IN PORTAL
- Input Tax Credit Puf panels
- Unable to convert User role from Registered user to Business user on MCA V3 portal
- Please help with SAC Codes (6 digits) for below mentioned services provided by Chartered Accountant
- Need to send letter to GST dept. For claimed missed ITC
- Printing Press under Composition Scheme
- 140-A Tax Wrongly Paid PAN No
- CSR funding for private limited companies
CAclubindia
