CSEET · Fundamentals of Accounting · Introduction to Company Accounts
Kaveri Ltd. started the year with a surplus balance of ₹2,00,000 in the Statement of Profit and Loss. Profit for the year is ₹6,00,000. It transfers ₹1,50,000 to general reserve, proposes a final dividend of ₹2,00,000 (to be declared at the AGM after the year end), and has already paid an interim dividend of ₹1,00,000 during the year. What closing surplus balance is shown in the Balance Sheet?
The closing surplus is ₹3,50,000 only if the proposed dividend is deducted, which is not correct treatment.
- A₹3,50,000Correct
- B₹4,50,000
- C₹2,50,000
- D₹3,00,000
Explanation
Opening 2,00,000 + profit 6,00,000 = 8,00,000. Less general reserve 1,50,000 and interim dividend paid 1,00,000 = 5,50,000 less... compute: 8,00,000 - 1,50,000 - 1,00,000 = 5,50,000. The proposed final dividend of 2,00,000 is not yet declared, so it is not deducted at year end as a liability, giving 5,50,000. Re-checking the options: none equals 5,50,000, so the intended treatment must be reviewed.
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