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The following is an extract from the statement of financial position of Gaga (a limited liability company ) as at 31 December 20X0:
Ordinary share capital (50 shares) $100,000
No new shares were issued during the year ended 31 December 20X1 .
On 31 December 20X1,Gaga paid a dividend to its ordinary shareholders of 25c per share.
On 31 December 20X1, Gaga proposed to pay its ordinary shareholders a dividend of 40c per share.
How much should Gaga have charged against retained earnings in respect of dividends in the year ended 31 December 20X1?
My question is if the final dividends are proposed on 31st December are they included in the statement of changes in equity or not?? And what if they they are proposed on 30 December, will they be included?
Proposed dividends do not appear anywhere in the statements as at 31 December (whatever date they were proposed on).
The reason is that they are only ‘suggested’ and they only become definite when shareholders actually vote on them (which will not be until after the 31 December).
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