Declaration of dividend and transfer to general reserve.
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
29 October 2013
A company having three dependent units have loss in one unit. Company declare a dividend and transfer certain profit into General Reserve. Company also prepared separate Balance sheet of each unit. Such dividend and general reserve are transferred from a loss unit out of Opening balance of surplus. There is any provision regarding to transfer to general reserve out of only current year profit, and also declared dividend only out of current year profit? (Company regularly declare dividend and transfer to general reserve each year.)
30 October 2013
Hi
The dividend is decide under the Companies Act, 1956 on the basis of profits available to the company as given in balance sheet and not on the unit basis.
The dividend is decide under the Companies Act, 1956 on the basis of profits available to the company as given in balance sheet and not on the unit basis.
Message likes :
1 times
30 October 2013
In case if the current year's net profits are not adequate or not available, a company may draw the required amount from reserves created out of transfer of profit in previous years as per the Companies (Declaration of Dividend out of Reserves) Rules, 1975 (Appendix 2) subject to the following conditions:—
(i) The rate of dividend declared shall not exceed the average rate of dividend declared in the five years preceding the current year or 10% of the paid-up capital, whichever is less.
(ii) The maximum amount to be drawn from the accumulated profits earned in previous years and transferred to the reserves shall not exceed 10% of the paid-up capital and reserves and the amount so drawn shall be first utilised for writing off losses incurred before declaration of any dividend in respect of preference or equity shares.
(iii) The balance remaining in the reserves after such drawal shall not fall below 15% of the paid-up share capital.
However, the above said conditions will not be applicable for utilisation of any profit earned in any previous years and remains as surplus balance of profit in the profit and loss accounts and carried to the balance sheet of the company.
In case if the current year's net profits are not adequate or not available, a company may draw the required amount from reserves created out of transfer of profit in previous years as per the Companies (Declaration of Dividend out of Reserves) Rules, 1975 (Appendix 2) subject to the following conditions:—
(i) The rate of dividend declared shall not exceed the average rate of dividend declared in the five years preceding the current year or 10% of the paid-up capital, whichever is less.
(ii) The maximum amount to be drawn from the accumulated profits earned in previous years and transferred to the reserves shall not exceed 10% of the paid-up capital and reserves and the amount so drawn shall be first utilised for writing off losses incurred before declaration of any dividend in respect of preference or equity shares.
(iii) The balance remaining in the reserves after such drawal shall not fall below 15% of the paid-up share capital.
However, the above said conditions will not be applicable for utilisation of any profit earned in any previous years and remains as surplus balance of profit in the profit and loss accounts and carried to the balance sheet of the company.
Message likes :
3 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CAPITAL GAIN REDEVELOPED FLAT
- Multiple payment of self assessment tax for A Y 2025-2026
- REGARDING ITR FILING QUESTION
- CLOSING STOCK QUERY
- Requirement under FEMA &RBI
- Sale of Mutual Funds In Diffirent Financial Years
- CASH GIFT FROM BLOOD RELATIVE
- Query regarding TDS on EPFO Higher Pension Arrears- under wrong section
- Old Traces Portal
- Query regarding reporting of exempt foreign remuneration in ITR
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
- Query regarding reporting of exempt foreign remuneration in ITR (AY 2026-27)
- FEMA/RBI treatment — Amazon.ca arbitrage (US buy, Canada sell, goods never enter India)
- Goods return by customer
- INWARD REMITTANCE FOREIGN
- CPC and SAC
- Account freezed for Ineligible ITC Scrutiny for GST Annual Return
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
