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Question
Justify the following statement.
Interim dividend cannot be paid out of free reserves.
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Solution
- A dividend declared by the Board of Directors between two AGMs is called an Interim Dividend.
- The interim dividend is paid in the middle of the accounting year.
- It is paid before the finalisation of annual accounts for the year.
- Free Reserves are the reserves available for distribution of profits as per the latest audited Balance Sheet of the Company.
- It is declared out of profits of the current accounting year.
- Hence, Interim Dividend cannot be paid out of free reserves.
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RELATED QUESTIONS
Distinguish between the following:
Interim dividend and Final dividend.
Payment of ______ Dividend must be authorised by the Articles of Association.
Write a word or a term or a phrase which can substitute the following statement.
Dividend declared between two AGMs.
Complete the sentence.
Interim dividend is decided and declared by ______.
Answer in one sentence.
What is Interim Dividend?
Answer in one sentence.
Who declares Interim Dividend?
Select the suitable option for the following.
____________ Interim Dividend.
Answer in one sentence.
At which Meeting Interim Dividend is decided and declared?
Correct the underlined word and rewrite the following sentence.
Final Dividend is paid between two AGMs.
Explain the following term/concept.
Interim Dividend
Study the following case/situation and express your opinion :
RAJ Company limited decides to pay Interim Dividend
- Is the Board justified to decide Interim Dividend of ₹ 5/per share even though profits till date are insufficient?
- Can the Board declare it out of Free Reserves?
- Can the Board declare it out of Capital?
Study the following case/situation and express your opinion :
DIAMOND Co. Ltd. is considering to declare Interim Dividend.
- In how many days of the declaration it should transfer the funds to Dividend Account?
- In how many days it must pay it to shareholders?
- In how many days of the declaration it must transfer the funds to the Unpaid Dividend A/c?
Justify the following statement.
AGM is crucial for Final Dividend.
Explain Interim Dividend.
