Interim Dividend - Appropriation - Payment |
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Interim Dividend - Appropriation - Payment |
| (1) | No dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2) or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation in accordance with those provisions and remaining undistributed or out of both or out of moneys provided by the Central Government or a State Government for the payment of dividend in pursuance of a guarantee given by that Government : Provided that -
Provided further that it shall not be necessary for a company to provide for depreciation as aforesaid where dividend for any financial year is declared or paid out of the profits of any previous financial year or years which falls or fall before the commencement of the Companies (Amendment) Act, 1960. |
Interim dividend can be declared by the Board of Directors at any time.
| (1A) | The Board of directors may declare interim dividend and the amount of dividend including interim dividend shall be deposited in a separate bank account within five days from the date of declaration of such dividend. |
Interim dividends are first paid and then appropriated from profits.
If provision for dividends account exits, then we consider the interim dividend account to be similar in nature to the provision for dividends account. Interim dividend account is treated as a current account or a non-current account accordingly as the provision for dividends account is current or non-current.
Since we need to consider only the accounts present in the balance sheet for the purpose of preparation of the statement of changes in working capital, and the interim dividend account would not be present in the balance sheet, we need not consider the transactions relating to interim dividends for the purpose of analysing funds flow when it is a current account.
| Payment of Interim Dividend | Dr. Interim Dividend a/c Cr. Bank a/c | Current Current |
|---|---|---|
| Charge to/against Profits | Dr. Profit and Loss a/c Cr. Interim Dividend a/c | Non-Current Current |
| Payment of Interim Dividend | Dr. Interim Dividend a/c Cr. Bank a/c | Non-Current Current |
|---|---|---|
| Appropriation from Profits | Dr. Profit and Loss Appropriation a/c Cr. Interim Dividend a/c | Non-Current Non-Current |
Since the balance sheet is prepared after finalisation of accounts, we will find no trace of the interim dividend, unless there is an indication in the form of adjustments or additional information.
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