Question

The following data relates to ABC Ltd: • Profit for the year ended 30 June 20X1, $500,000. • On 31 March 20X1, the directors decided to pay an interim cash dividend of $100,000. • On 7 April 20X1, the interim dividend was paid. • For final dividends, the company’s constitution provides that the directors can recommend a dividend to be subsequently declared by a resolution of the members in a general meeting. • The directors recommended a final dividend of $250,000 to be paid. • The shareholders accepted the final dividend at the annual general meeting, and payment was made on 14 September 20X1. Required:

(a) Prepare journal entries to record the above dividend payments.

(b) Prepare the retained profits general ledger account.

Answer 1

b) Retained earning A/c

the books close on June 30,2XX1 and the dividend which required shareholder approval are not recorded at books closer date i.e June 30,2xx1.

the above retained earning account is prepared to reflect the balance on 30 Sep, Since opening retained earning balance is not given it is assumed to be zero.

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