Basic query in accounting

This query is : Resolved

pavankumar (Querist)
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07 October 2013 Please explain below statement.
once dividend is proposed it is mandatory for company to declare it?And what about Interim dividend?

I will be very much thankful to you.

Sanket

Sanket (Expert)
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07 October 2013 The dividend declared by a company
after finalisation of accounts in the
annual general body meeting with the
approval of the share holders is final
dividend.But the dividend declared by
the company in anticipation of good
profits before the finalisation of
accounts , with the approval of the
board od directors is called interim
dividend.It is called interim, because it
is paid ,in between two annual general
board meeting n without finalisation of
accounts n without approval of the
share holders.It favourably affects the
share holders in two ways.1.The share
holders get cash before the end of the
year in the form of dividend.2.The share
price of the company increases due to
improved sentiment for interim dividend

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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07 October 2013 The dividend shall be paid within 30 days from the date of declaration.

Sec 207 requires payment of dividend within 30 days of declaration. Sec 207 also covers certain circumstances in which dividend need not be paid. Revocation of dividend is not a ground for non-payment of dividend.
Thus, ordinarily a dividend once declared cannot be revoked.

Interim dividend once declared, like final dividend, is a debt due from the company, and thus is not revocable except under the same circumstances in which the final dividend can be revoked.

regards,

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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07 October 2013 Where a dividend has been illegally declared, the members can revoke the dividend.

However, if illegally declared dividend is paid, then the directors shall be responsible and accountable to the company personally,

Where the company ceases to be a going concern, declared dividend may be revoked.

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