how should we treat unclaimed dividend and also security premium in the cash flow statement ? in case:
1. both of the above items are included in the same balance sheet or same problem
2.each of the above itemsis given in 2 separate questions
Hi Namitha, in both the cases, there is same treatment of Unclaimed Dividend and Securities Premium.
Unclaimed Dividend: It should be deducted from the amount of Proposed Dividend Paid because it represents that amount of Dividend which is not yet paid.
Securities Premium: When Securities Premium Reserve increases it should be added to Proceeds from Issue of Shares (under Cash Flow from Financing Activities) in Cash Flow Statement because it is a cash inflow (of Financing nature) for the company.
Unclaimed Dividend: It should be deducted from the amount of Proposed Dividend Paid because it represents that amount of Dividend which is not yet paid.
Securities Premium: When Securities Premium Reserve increases it should be added to Proceeds from Issue of Shares (under Cash Flow from Financing Activities) in Cash Flow Statement because it is a cash inflow (of Financing nature) for the company.
Decline in the balance of Securities Premium Reserve may be due to any of the five reasons as given in Section-77(a) like writing of preliminary expenses, buy back of own shares etc. Such decline is not shown in Cash Flow Statement as the cash position of the company remains intact (unaffected) because writing off, these expenses against Securities Premium Reserve involves no cash outflow.