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CA Intermediate · Advanced Accounting · Financial Statements of Companies

Tulsi Engineering Ltd. had a profit after tax of ₹90,00,000 for FY 2026-27. Its 8% preference dividend is ₹6,00,000 and it proposes an equity dividend of ₹20,00,000. It has 10,00,000 equity shares outstanding all year. Under Schedule III and AS 20, which of the following is correct about the 'Earnings per share' disclosure and the balance sheet treatment of the proposed equity dividend before approval by shareholders at the AGM?

Basic EPS is ₹8.40, since profit of ₹90,00,000 less preference dividend ₹6,00,000 is ₹84,00,000 over 10,00,000 shares. The proposed equity dividend is not provided for as a liability before approval; it is only disclosed in the notes.

  1. ABasic EPS ₹8.40; proposed dividend shown as a provision
  2. BBasic EPS ₹9.00; proposed dividend shown as a provision
  3. CBasic EPS ₹8.40; proposed dividend not recognised as a liability but disclosed in notesCorrect
  4. DBasic EPS ₹9.00; proposed dividend not recognised as a liability but disclosed in notes

Explanation

Basic EPS = (90,00,000 − 6,00,000 preference dividend) / 10,00,000 = ₹8.40. Under AS 4 (revised), dividends proposed after the balance sheet date are not recognised as a liability at the balance sheet date but are disclosed in the notes. Hence EPS 8.40 with disclosure only. Options with ₹9.00 ignore the preference dividend.

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