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Dividend

MIMuhammad Irfan6y ago
Hi I have a general question that if profit is not equal to cash then why cash dividend is paid out of profit/retained earnings? shouldn't it be paid from cash directly?
John MoffatJohn MoffatTutor6y ago#1
You should remember from Paper FA (was F3) that the double entry when a dividend is paid is Credit Cash and Debit Retained earnings. They need to have made profits (and therefore have retained earnings) in order to pay dividends.
MIMuhammad Irfan6y ago#2
Cleared Thanks
John MoffatJohn MoffatTutor6y ago#3
You are welcome :-)
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