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DIVIDEND EQUALISATION- Mutual Fund


Suresh Prasad (www.aubsp.com)     10 January 2011

Suresh Prasad
www.aubsp.com 
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DIVIDEND EQUALISATION


New investors are not entitled to any share of the income of a mutual fund scheme which arose before they bought their units. However, at the end of each distribution period the fund management allocates the same amount from the income of the fund to each unit. To compensate for this an equalisation payment is added to the cost of new units. This is the amount of income that has arisen up to the date of purchase of the unit. Because these payments are included in the amount available for distribution they are effectively repaid to the purchaser. The purchaser's dividend voucher at the end of the first distribution period should show the amount of the returned equalisation payment.

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Karan Teli (Life Is just an Illusion...!!)     22 January 2011

Karan Teli
Life Is just an Illusion...!! 
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Is this different from DIVIDEND EQUALISATION RESERVE...? which says that the company, to keep its own market value would transfer some amount to this reserve and once the company has less profits when compared to its rivals it would withdraw the same amount from the said reserve and pay its dividend to maintain its MV of shares...

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Prabhat kumar Shrivastava (Audit Assistant)     17 September 2013

Prabhat kumar Shrivastava
Audit Assistant 
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thanks for  sharing knowledge

PRABHAT KUMAR SHRIVASTAVA 

CA FINAL

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Sai Satish Goklani (Student CA final)     18 August 2017

Sai Satish Goklani
Student CA final 
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Thanks a lot!

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Kamlesh Kakde Patil (Articled Assistant)     27 October 2017

Kamlesh Kakde Patil
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While taking amount in addition to actual cost of unit from a new investor on account of Dividend equalization, doesn't it consider the time value...? (i.e. present value of amount which is to be offered to a new investor, going to be compensated)

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apeksha jain (4)     13 January 2018

apeksha jain
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Can you explain this with an example??

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