Dividend Treatment - Urgent

[Avviey]

Hi,

I was using last year's course notes, but I looked at the 2009/2010 updates on the course notes, I noticed there are changes regarding the treatment of approval of dividends in income statement. I understand that once dividends are paid, it will be deducted from the cash balance and retained earnings. So So I think here "paid" means approval of dividend?

But what about dividend proposed? It only needs to be mentioned in the notes and no need to include it in the accounts, is that right?

By looking at the CMP upgrade, I'm confused as to "approved", "paid" and "proposed" and how they affect the income statements and balance sheet.

I'd really appreciate alot if anyone can help to clarify for me. Thanks heaps.

 

[Meshali]

Hi

My understanding is that the dividend proposed should only be included in the notes to accounts.
The only dividends that appear in the financial statements should be those that have been "paid" in the accounting year. These are usually in the trial balance, so it is deducted from the retained earnings in the balance sheet.

The course changed so that only paid dividends are recorded, any proposed/approved are just treated in the notes to accounts.

Hope that helps.

Meshali

Hi,

I was using last year's course notes, but I looked at the 2009/2010 updates on the course notes, I noticed there are changes regarding the treatment of approval of dividends in income statement. I understand that once dividends are paid, it will be deducted from the cash balance and retained earnings. So So I think here "paid" means approval of dividend?

But what about dividend proposed? It only needs to be mentioned in the notes and no need to include it in the accounts, is that right?

By looking at the CMP upgrade, I'm confused as to "approved", "paid" and "proposed" and how they affect the income statements and balance sheet.

I'd really appreciate alot if anyone can help to clarify for me. Thanks heaps.

 

[prmenon]

Hi
This is what i could understand, do correct me if i am wrong

There are 3 stages mentioned for dividends 1. proposed 2. approved 3. paid

Proposed | Approved | Paid | Comments
Yes | Yes | Yes | Dividend is paid for last year; Include a
note under income statement; Reduce the
dividend from the retained earnings

Yes | Yes | No | Dividend approved for last year not paid yet
Include a note under income statement;
Do not Reduce the dividend from the
retained earnings/ equity statement; But
include it in the current liability of BS

Yes | No |No | Must be disclosed only in the notes and it
does not affect the Income / equity /
Balance Sheet

 

[Simon James]

You are right. Only stages 1 & 3 are examinable.