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the issued share capital of alpha a limited liability company as follows :
$
ordinary shaes of 10c each 1,000,000
8% redeemable preference share of 50c each 500,000in the year ended 31 october 2002 the company paid the preference dividend for the year and an interim dividend of 2c per share on the ordinary shares .a final ordinary dividend of 3c per share was proposed before the reporting date .
what would be recognised for dividends in the equity section of the statement of financial position at 31 october 2002 ?
sir completely i dont know how to do the answer please help in a simple and easy way !!!
Thank You !!!Nothing ever appears for dividends in the equity section of the SOFP!!!
Dividends paid during the year or declared before the year end, appear in the Statement of changes in equity,
Dividends declared but not paid as at the year end also appear as a current liability in the SOFP.
Proposed dividends appear nowhere (because they are not certain – they have not been voted on).
Preference dividends are ‘certain’ and so the full amount for the year appears in the SOCE whether paid or not. If any has not been paid at the end of the year then it is also shown as a current liability in the SOFP.
Sir,
Could you explain more about redeemable and irredeemable preference shares..If its redeemable preference shares, does the dividend appear as an expense under finance charge, smilar to loan notes? And the redeemable preference share appear as non-current liabilities, not under equity?
Do the irredeemable preference shares appear under equity? And its dividend in SOCIE?
If in a question they simply say preference shares which treatment should I choose?
Yes to all your questions 🙂
If you are not told whether they are redeemable or irredeemable, then you assume that they are irredeemable.
Sir, could I further ask about ordinary dividend.
I know that interim ordinary dividend paid is adjusted in SOCIE.
Ordinary dividend proposed and declared after the year end, (before finalising of accounts) are non adjusting events, unless the the dividend was approved by shareholders. Proposed or declared but unapproved dividends would be disclosed in the notes. Any such dividends approved would be deducted in SOCIE and accrued in SoFP. Am I on the right track so far here?
If in a question they just say dividend declared before the year end (but doesnt give any info if they are approved or not and no info about finalasing accounts)..
Do I deduct that dividend in SOCIE and Accrue it as a liability?If the question says that the dividends were declared before the year end, then they approved and will appear in the SOCE and also as a liability in the SOFP.
If the dividends were only proposed before the year end, then they are not approved and therefore appear nowhere.
what are correct entries for the ordinary div transaction.
Is that correct with Dr RE, Cr Share capital, Finance cost and Div payables no effect?
this topic is completely alive after 10 years 😀
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