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Question
Justify the following statement.
Interim dividend cannot be paid out of free reserves.
Solution
- A dividend declared by the Board of Directors between two AGMs is called an Interim Dividend.
- The interim dividend is paid in the middle of the accounting year.
- It is paid before the finalisation of annual accounts for the year.
- Free Reserves are the reserves available for distribution of profits as per the latest audited Balance Sheet of the Company.
- It is declared out of profits of the current accounting year.
- Hence, Interim Dividend cannot be paid out of free reserves.
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RELATED QUESTIONS
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