Advertisements
Advertisements
Question
Distinguish between the following:
Dividend and Interest
Solution
| Points | Dividend | Interest |
| Meaning | The dividend is the return payable to the shareholders of the company for their investment in the share capital. | It is the return payable to the creditors of the company viz. Debenture holders/Deposit holders for the loan given by them to the company. |
| Given to whom | It is paid to the member, i.e., the owners of the company. | It is paid to the creditor of the company. |
| Obligation | It is to be paid only when the company has made profits. Therefore no obligation/compulsion to pay dividends. | It is not linked to the profits of the company. Payment of interest is an obligation and is to be paid by the company compulsorily. |
| When Payable | It is payable when a company earns sufficient profit in a year after fulfilling all obligations. | It is payable every year, irrespective of the profits of the company. |
| Rate | It is paid at a fluctuating rate to the equity shareholders since it is linked to the profits of the company. | The rate of interest is fixed and predetermined at the time of issue of the security. |
| Resolution | Payment of a Final Dividend requires a Board resolution and an ordinary resolution at the AGM while Interim Dividend can be paid by passing only a Board Resolution. | Payment of interest does not require the passing of a resolution at any meeting. |
| Accounting Treatment/Aspect | A dividend is an appropriation of profit. | Interest is a charge on profit. |
APPEARS IN
RELATED QUESTIONS
______ is a return paid to creditors by the company.
Write a word or a term or a phrase which can substitute the following statement.
The return paid to the creditors by the company.
State whether the following statement is true or false.
Interest is a liability for company.
State whether the following statement is true or false.
Interest is paid to shareholders of company.
Complete the sentence.
The obligatory payment made by company to its creditors is called as ______.
Select the suitable option for the following.
____________ Final Dividend.
Select the suitable option for the following.
Deposit Holders ____________.
Answer in one sentence.
What is Interest?
Correct the underlined word and rewrite the following sentence.
Interest is paid to shareholders.
Explain the following term/concept.
Interest
Explain the features of Interest.
Justify the following statement.
Interest is a liability/obligation of the company.
The reward given for the use of capital
