Asked by Fatima Zahra on Jun 12, 2024
Verified
A company with a constitution that provides for the declaration of dividends will recognise a liability for dividends payable if:
A) the dividend is recommended before the balance date but not declared.
B) the dividend is declared before the balance date.
C) the dividend is recommended and declared after the balance date.
D) none of the above.
Constitution
The system of fundamental principles or established precedents according to which a state or other organization is governed.
Dividends Payable
represents a company's obligation to pay its shareholders a declared amount from its earnings.
Liability
A financial obligation or amount owed by a business or individual to others, which must be settled in the future.
- Become familiar with the method of treating dividends in financial statements and its impact on the consolidation.
Verified Answer
AM
Arlet MogrovejoJun 13, 2024
Final Answer :
B
Explanation :
A liability for dividends payable is recognised when the dividend is declared before the balance date. This is because the company is obligated to pay the dividend to its shareholders. If the dividend is recommended before the balance date but not declared, there is no obligation to pay the dividend yet. If the dividend is recommended and declared after the balance date, it belongs to the next financial period. None of the above options cover the circumstance.
Learning Objectives
- Become familiar with the method of treating dividends in financial statements and its impact on the consolidation.