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Hello Sir, I am wondering why ordinary dividend declared prior to the year end should be credited to Finance cost? (along with Dr RE & Cr Dividend Payable). Thank you.
I do not know where you are quoting this from, but they are never credited to finance cost!
Sir, it is from BPP’s revision kit mock 3:
An ordinary dividend is declared prior to the year end. Identify, by selecting the correct box in the table below, what the accounting treatment relating to the ordinary dividend in the financial statements is.Dr Cr No effect
Share Capital (SOFP)
Retained Earnings (SOFP)
Finance Cost (SPL)
Dividend Payable (SOFP)Answer:
No effect
Dr
Cr
CrUnless there is more to the question, then the answer regarding finance cost is wrong – there is no effect. There cannot be a debit with two credits!!!
Have you watched my free lectures on this?
An interim dividend will have been paid during the year and therefore will have reduced the cash balance and will appear in the statement of changes in equity. It will not appear separately in the SOFP.
Have you not watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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