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Financial statement
Accountancy
In thie sum why are deducting 142500 from 800000. 142500 is the excess profit after utilizing preference Dividend. Then it should be available as a reserve for divided purpose right? What is the logic?
Answers (1)
The logic is that first u deduct preference dividend as it is a charge on profits and must be paid by the company whether it has profits or losses.the pref div is 157500..now what is the net profit u have in q? 3l - 157500 ..which. Comes to 142500..equity dividend is supposed to be 8L right ..how can u pay so much of u have only 142500 ..so the balance since profits are insufficient will be transferred from general reserve ,ie ,8L -142500 becuz all u have left in profit is 142500..now use the dividend n general reserve requirements and verify how much u can actually transfer from general reserve .. I hope it's clear now
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