CA.CWA.Venkatesh Repala
(CA CWA;(CS PROFESSIONAL))
(1231 Points)
Replied 29 April 2011
As per my knowledge, it is required to taransfer certain amount of profit to general reserve at time of dividend declaration. Thus General Reseve is created.
Balance remaining after providing dividend payment shos profit and loss a/c.......
Sachin
(student)
(214 Points)
Replied 29 April 2011
@ above
Ya u r right. We have to tranfer sum amount to reserve at the time of declation of dividend but WHY???
The law could have said retain the % we r supposed to tranfer in Reserve a/c in Credit Bal of P&L only... Why to transfer it to reserve???
CA.CWA.Venkatesh Repala
(CA CWA;(CS PROFESSIONAL))
(1231 Points)
Replied 29 April 2011
As per my knowledge,
Behind this there is a great logic.........
In order to support and have a base, that dividend payment is having certain value but not declared just to bluff the share holders.
This same logic is used even by RBI in printing currency(mint), it will maintain certain gold reserves to support that the currency issued by them is having value.
U may ask why to have value?
This is because if any of us ask RBI i want to know that that Rs. 100 note is having value how can u represent ? then rbi shows their gold reserves as support or base .............
I expect u got the point, this is my logic observed.... It may differ or may not be correct..
CAclubindia
