Dividend , general reserves treatment in company
Atharv Sankliya (1354 Points)
22 May 2022
dividend , general reserves treatment in company accounts ?
10 Replies
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 22 May 2022
Dr. Finance costs
Cr. Dividends payables
General Reserves are also referred to as “ Free Reserve “. According to the Companies Act, general reserve is to be created only when there is sufficient profit in an enterprise. Hence it is clear that it is not compulsory to create general reserve.
Dr. Retained earnings
Cr. General reserves
Eswar Reddy S
(CFO- at NHTF)
(58275 Points)
Replied 22 May 2022
PAT may be added to general reserves every year.
Dividends can be considered as debt due . So the liability may be created for proposed dividend either from current year profits past profits as per the board resolution and Share holders approval
Dividends can be considered as debt due . So the liability may be created for proposed dividend either from current year profits past profits as per the board resolution and Share holders approval
sabyasachi mukherjee
(27579 Points)
Replied 22 May 2022
Dividend is never considered as debt due.
Its a payable account and paid from the undistributed profit of the company.
Its a payable account and paid from the undistributed profit of the company.
Eswar Reddy S
(CFO- at NHTF)
(58275 Points)
Replied 22 May 2022
Once dividend is declared it is debt due to share holders , it can't be revoked.
Read companies act once
Read companies act once
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 22 May 2022
Yes Mr. Sabhyasachi is correct. Dividends paid can be like
Dr. Retained earnings/ Finance costs
Cr. Bank
and above entry can be used for proposed dividends.
Eswar Reddy S
(CFO- at NHTF)
(58275 Points)
Replied 22 May 2022
Current or past profits can be the source of dividend.
If it become liability / debt due then then only there is meaning for payment.
1. P & L / General Reserve A/c Dr
To Proposed Dividend
2.Proposed Dividend A/c
To Bank
First entry on declaration of dividend and 2nd entry for making the payment
If it become liability / debt due then then only there is meaning for payment.
1. P & L / General Reserve A/c Dr
To Proposed Dividend
2.Proposed Dividend A/c
To Bank
First entry on declaration of dividend and 2nd entry for making the payment
sabyasachi mukherjee
(27579 Points)
Replied 02 June 2022
It's not debt due. The nomenclature is not correct.
Eswar Reddy S
(CFO- at NHTF)
(58275 Points)
Replied 02 June 2022
Once the dividend is declared then it can't be revoked. It has to be paid to SH.
Read the Companies Act once
Read the Companies Act once
sabyasachi mukherjee
(27579 Points)
Replied 02 June 2022
Who has told it can be revoked.Let me explain the provisions of companies act.
Sec 123 of companies act 2013
no dividend can be declared or paid by a company for any financial year except
1. out of profits of the company.
arrived at after providing for depreciation
the dividend proposed are of two types proposed and final.
2. out of money provided by the Central govt.
3. the amount of dividend including interm dividend shall be deposited in a scheduled bank in a seperate account within 5 days from the date of declaration of dividend.
So I know the basics.
Sec 123 of companies act 2013
no dividend can be declared or paid by a company for any financial year except
1. out of profits of the company.
arrived at after providing for depreciation
the dividend proposed are of two types proposed and final.
2. out of money provided by the Central govt.
3. the amount of dividend including interm dividend shall be deposited in a scheduled bank in a seperate account within 5 days from the date of declaration of dividend.
So I know the basics.
Eswar Reddy S
(CFO- at NHTF)
(58275 Points)
Replied 02 June 2022
What is the purpose of transferring the amount to special account if it is possible to revoke?
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