Lock in 2 Yrs of CAclubindia Pro Benefits & Save Rs 499. Subscribe Now!

Preference dividend

835 views 2 replies

JOSEPH DAVID

GM FINANCE

286 Points Posted on 09 March 2009

X Ltd has issued cumulative redeemable preference shares to Y Ltd. It could not pay dividend on 31st March 09. Is it necessary to make provision for preference dividend in X ltd books? Whether Y Ltd also should show in their books as preference dividend receivable as on 31.03.2009 though not receiving for that year. regards joseph

Replies (2)

CA SUDIPTA SINHA

Commerce Coaching- Accounts Cost FM

735 Points Posted on 09 March 2009

as it is cumulative preference sahre dividend can be accumulated and paid in the subsequent year......so if divedend is not paid in one year it can be paid in the next year.....and for this the issuing company (X Ltd.)shall make a provision.....and also the other company (Y Ltd) shall record it as dividend receivable in its books....

Guest

NO....no provision is made for unpaid preference dividend on Cumulative prefernce Shares...Infact it is disclosed as a contingent liability in Notes on Accounts as per AS-29.

Dividend is recognised as an income when right to receive dividend has been established as per AS-9 and hence it should be reconsided only when dividend is declared.

>>Vipul Garg