proposed dividend accounting treatment

As per the ammendment in AS 4, Proposed Dividend is not a liability which is to be recognised in books of accounts but is only contingent in nature untill declared. So, dividend payable to be only recognised when declared.

If in case a company has shown proposed dividend, it is an error on part of the company and should be rectified.

Journal Entry for the cancellation of Proposed Dividend be:

Proposed Dividend       Dr.

          To General Reserves/ P/L

In both the chapters of Amalgamation and Consolidation, before starting the question, pass the rectification entry and solve the question normally.

Hope this helps!!

Please check the below video for better understanding  "Proposed Dividend Amendment impact in Consolidated Financial Statement - By CA Gopal Somani"

https://youtu.be/IlbBnEYC8wU

Please let me know if you have any further query.

Welcome..I am glad that the video was helpful for you.