When proposed dividend made or paid during the year is given in adjustment then what does it imply? Why it is given in adjustment inspite it is already given in balance sheet showing the amount of current year and past year?also explain the proposed dividend a/c.

Dear Student

In the balance sheet, proposed dividend made or paid is not given, the Balance sheet shows that Account balance of proposed dividend in the books of accounts. The addition or Deletion in that account which is required for preparing cash flow is not given in the balance sheet, therefore we require additional information. 
However, if no additional information is given regarding the same we assume that the opening balance of proposed dividend is paid in cash and the closing balance is the amount we have charged from profit and loss account for the declaration of the dividend of the current year.

Now, e.g of adjustment say: 
1. Proposed dividend paid Rs 50,000/- - means Rs 50,000 outflow of cash in the form of dividend payment of last year.
2. Proposed dividend made Rs 50,000 means Rs 50,000/- proposed dividend liability is created by charging it from profit and loss account.

Hope this helps


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