CS Executive · Corporate Accounting and Financial Management · Dividend Decisions
Under the Companies Act, 2013, which of the following is a permitted source from which a company may declare dividend for a financial year?
A company may declare dividend out of current year profits after providing for depreciation. Securities premium, capital redemption reserve and revaluation surplus are capital items, not distributable profits, so they cannot be used for paying dividend under the Companies Act, 2013.
- AProfits of the current year after providing for depreciationCorrect
- BSecurities premium account balance
- CCapital redemption reserve account
- DUnrealised revaluation surplus of fixed assets
Explanation
Dividend may be declared out of profits of the current year arrived at after providing for depreciation, or out of accumulated free reserves of earlier years, or out of money provided by the Government. Securities premium, capital redemption reserve and revaluation surplus are capital in nature and cannot be distributed as dividend.
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