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Dividend Exp.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Dividend Exp.

  • This topic has 5 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • October 19, 2015 at 9:25 pm #277670
    Sir Insanity
    Participant
    • Topics: 28
    • Replies: 44
    • ☆☆

    Dividends paid aren’t shown on the Statement of Profit or Loss. Why?

    They’re expenses, so… why not? (Dr Div. (Exp.), Cr Cash/CL)

    October 20, 2015 at 4:12 am #277703
    Sir Insanity
    Participant
    • Topics: 28
    • Replies: 44
    • ☆☆

    But for instance, the following question suggests that dividends DO appear on the income statement? (SOP&L)

    The following information is available about a company’s dividends:

    2005 Sept. – Final dividend for the year ended 30 June 2005 paid (declared August 2005) —- 100,000

    2006 March – Interim dividend for the year ended 30 June 2006 paid — 40,000

    Sept. – Final dividend for the year ended 30 June 2006 paid (declared August 2006) — 120,000

    What figures, if any, should be disclosed in the company’s SOP&L for the year ended 30 June 2006 and its SOFP as at that date?

    ———SOP&L————————- SOFP for the period liability
    A $160,000 deduction —————-$120,000
    B $140,000 deduction —————- nil
    C nil —————————————$120,000
    D nil ————————————— nil

    The answer is apparently B.
    I disagree. Should it not be D? (Nil in SOP&L)

    October 20, 2015 at 7:40 am #277744
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    Dividends are certainly not expenses!!!

    The business makes a profit, they then decide how much (if any) of the profit to give to the owners as dividend, but it does not make the profit any different!

    October 20, 2015 at 7:43 am #277747
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    The question you have typed out is in the test at the end of the chapter on limited companies in our free lecture notes.

    If you look at the answers in the notes, then the correct answer is shown as D (not B).

    Presumably you found this question somewhere else, in which case they have obviously printed the answer wrongly.

    October 21, 2015 at 8:59 pm #278268
    Sir Insanity
    Participant
    • Topics: 28
    • Replies: 44
    • ☆☆

    Many thanks!

    Also, if the question does not specify if the preference shares being paid are redeemable or irredeemable, is there some common assumption?

    Once more, thank you!

    October 22, 2015 at 7:50 am #278327
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    No – there is no common assumption.

    If it is relevant then you will be told.

  • Author
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