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sir can u kindly let me know if dividends on ordinary shares are declared before the year end where will they appear? similarly dividends declared after the year end are suppose to go where?
secondly if sales day book is under casted will it affect the trial balance and would a suspense be needed ?
Dividends declared before the year end will appear in the SOFP as a current liability, and in the SOCE.
Dividends declared after the year end will not appear anywhere in this years statements.If the sales day book is undercast the trial balance will still balance (the same wrong amount will have been entered in both accounts) and therefore the suspense account is not needed.
I do suggest that you watch by free lectures – I explain both of these matters.
The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.Thank you sir. I have one doubt sir .In soce we only take dividends that are paid right? then why are we taking dividends declared also .
secondly if there is an error in the addition of the cashbook will it affect the trial balance or just like an error in the sales day book it wont affect .
I have watched your lectures sir and they are really good .
Thankyou once again.Dividends appear in the SOCE in the year in which they become ‘certain’, which is either when they are paid or when they are declared.
An error in the cash book is similar to an error in the sale day book – because it is only a book of prime entry, it will not stop the trial balance balancing.
Thankyou sir.
But sir the question no. 5 of chapter 17(practice questions SUSPENSE)
QS: WHICH OF THE FOLLOWING BALANCE WOULD CAUSE A TRIAL BALANCE NOT TO BALANCE ?
ANS: AN ERROR IN THE ADDITION IN THE CASH BOOK.
I didn’t understand this as an error in the cash book would cause both the entries to be wrong and therefore the trial balance will balance.
I was wrong in my answer before – I answered too quickly. Sorry 🙁
Because of the analysis columns, if one column is added up wrongly then it will cause the trial balance not to balance (and therefore need a suspense account), because the totals are posted from each column separately.
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