What is dividend and why is dividend decision important?
The word dividend is derived from 'dividendum' which means total divisible sum. The
expression dividend has two meanings. For an existing company, i.e., going concern, the
dividend is the distribution of divisible profits by a joint stock company to its
shareholders by way of return on their investments in the shares after complying with the
provisions of the Companies Act and Articles of Association of the company. In the case
of winding up, it means a division of the realised assets among the creditors and
contributors according to their respective rights. The legal provisions as to dividends for a
company as a going concern are summarised as under:
1. Dividends cannot be paid except out of profits. As such the payment of dividend
is ruled out when there is loss except where the Central or State' Government has
guaranteed the payment of dividends by the company (Section 205).
2. Dividend must be paid within 42 days of declaration (Section 207).
3. Dividend is payable only to a registered shareholder or on his order to his banker.
However where a company has issued share warrants in pursuance of Section 114,
dividend is to be paid to the bearer of such warrantor to his banker.
4. Articles normally provide (as Article 88 of. Table A) that dividends may be paid
up in proportion to the amount paid up on each share (Section 93). In the absence .of such
provision, dividends
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Cost Concept
The following is the Trial Balance of a trader as at 31st December, 2001:
Adjustments:
- Stock at the end was Rs. 78,600
- Included amongst the debtors is Rs. 3,000 due from Zeenat and included amongst the creditors is Rs. 1,000 due to her.
- The effect of advertising not yet expired, a quarter of the amount ‘Printing and Advertising’ is to be carried forward to the next year.
- Reserve 2 per cent for discount on Debtors and create a bad debts reserve at 5 percent.
- A depreciation of 10% p.a. is to be written off Furniture and fittings.
- Wages owing on 31st December, 2001 is Rs. 300, salaries owing Rs. 500 and carriage owing Rs. 100.
- Prepaid insurance is Rs. 80.
- Furniture which stood at Rs. 600 in books Ist January, 2001 was disposed of at Rs. 290 on June, in part exchange for new furniture costing Rs. 520. A net invoice at Rs. 230 was passed through the purchase-day book.
- Purchase Invoice amounting to Rs. 400 had been omitted from the books.
- A Neon-sign costing Rs. 100 is included in Advertising.
- Two dishonored cheques for Rs. 200 and Rs. 300 respectively has not been entered in the cast book. The first for Rs. 200 is known to be bad. In the case of a second cheque for Rs. 300, it is expected that 75% of it would be realized.
- Private purchase amounting to Rs. 600 had been included in the Purchase Day Book.
- Charge full year’s interest on Deposit with Pran at 7% p.a.
- Provide for interest on Bank loan for the amount due.
Prepare Final Accounts.
Money Measurement Concept
: From the following Balance Sheets of Sriramco, prepare
(a) Statement of Changes in Working Capital, and (b) Funds Flow Statement: Balance Sheet of Sriramco as on 31st December…
The following additional information is also available
- A machine has been sold for Rs. 40,000 whose written down value was Rs. 36,000.
Depreciation of Rs. 15,000 has been charged on plant in 2001;
- A piece of land had been sold out in 2001 and the profit on the sale has been credited to
capital reserve;
- An interim dividend of Rs. 30,000 has been paid in 2001;
- Income tax paid during 2001 amounts to Rs. 45,000;
- Preference Shares were redeemed at 5% premium.
What is dividend and why is dividend decision important?
Concept of conservatism
The following details relates to the two machines X and Y:
Annual income after tax and depreciation:
Overhauling charges at the end of third year Rs. 25,000 on machine X. Depreciation has been charged at straight line method. Discount rate is 10%? P.V.F. at 10% for five years are 0.909, 0.826, 0.751, 0.683 and 0.621. Suggest which project should be accepted.