Dear experts/fellow students,
Please clarify my doubts.....
Please lend me your valuable time and answer at least part of my queries
1. As per the Companies (Transfer of profits to reserves) Rules, Company has the option whether to transfer profits to reserves - yes? That is to say, the rules do not prohibit a company from carrying forward any balance of the Profit and loss account, without transferring them to reserves?
2. Unless such profits are actually transferred to General reserve, the Companies declaration of dividend out of reserves rules will not apply, where the dividend is paid out of previous years profit?
[Pls see the wordings of 205(3) - ".......EARNED by the company in previous years AND TRANSFERRED by it to the reserves...."]
3. Hence in case the company has carried its accumulated profits in the P&L account shown in the balance sheet, can there be restriction on the payment of dividend out of this Profit and loss account, if the company has insufficient profit in this current year?
[Because as per my understanding, dividend can be paid out of the current year profits OR profit(s) of the previous financial year(s) which have not been transferred to reserves, OR BOTH]
I hope that as always, you will share your expert opinions in this matter.
Advance thanks.
CAclubindia
