DURING AUDIT OF BOOKS OF ACCOUNT OF A PVT LTD I NOTICED THAT,THE COMPANY HAS DECLARED INTERIM DIVIDEND OUT OF ITS RESERVE WHILE HAS ENOUGH CREDIT BALANCE IN PROFIT AND LOSS ACCOUNT.CAN A COMPANY DO SO.IF YES, WHAT IS THE CONDITION RELATED THERETO.
17 July 2008
"Declaration of Dividend out of reserves Rules 1975" allow a company to declare dividend out of reserve if there no profits. it means, first a company shud exhaust its profits (current and accumulated), then move to reserves. in ur case, the company shud not declare dividend out of reserve bcoz it have suffcient profits.
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