Dividend is appropriation of

profits
Interim Dividend
Final Dividend
Difference btw dividend and interest
Difference between Dividend and Interest
 Difference between Dividend and Interest
Dividend Interest

Return on Capital invested Service of debt

Appropriation of profit Charge on Profit

Dividend is not fixed except in the case of Interest is fixed

preference share holders
Payable only in the case of profits or out May be paid from capital receipts
of profits
 Declaration of Dividend
• Out of the profits of that year or from
previous after providing for depreciation
• Out of money provided by central govt or
state govt in pursuance of any guarantee
taken
 Dividend in adequacy of profits
• Rate is upto to the board of directors
• Transfer to reserve
• Previous years losses to be set off against the
current year profit
 Practical question
• A company has a capital of rs 1 crore and it has total
liability of rs 2 crore. In the year ending company
earned a huge profits of rs 100 crore. The Board of
Directors has decided to declare dividend of 50
percent that is rs 50 Lakhs. Looking to the amount of
profits and total liability the members want to
increase the dividend amount upto 2 crore from rs 50
lakh declared by the board. Can the members do so?
• No the members cannot increase the dividend amount
 Dividend in case of inadequacy of profits

• May be paid from accumulated profits of

previous years and free reserves
• Rate of dividend average of last three years
• Permitted amount shall not exceed one tenth
of capital and free reserves
• Sett off losses first
• Balance of reserve must be 15 % of capital
 Practical question
• The company had a profits record for the last three years
preceding to the previous year but it hasn’t declared any dividend
in those three years. In the previous year it has incurred losses
which is one-fifth of total profits earned in those three years. Can
company declare dividend for the previous year?
• Previous year 2020-21 company cannot distribute any dividend as
last three years average is 0%
• Last three years preceding to previous year are
• 2019-20 ------ rate of dividend 0%
• 2018-19 ------- rate of dividend 0%
• 2017-18 ------- rate of dividend 0%
 Practical question
• A company has a capital of rupees 10 lakh. It is also having a free
reserve of rs 2 lakh. In the last three years it has declared dividend
at the rate of 8%, 10% and 12%. In the current year it has incurred
a loss of rupees 50000. State the maximum amount which the
company can distribute as dividend for the current year.
• 10 % 100000
• Maximum withdrawal 120000
• 15% balance of reserve (200000-150000)=50000
• The minimum of above three will be withdrawn from the reserves
50000.First it would be used for setting off current year losses
i.e.50000 so dividend will be rs ZERO
 Provisions regarding dividend
• Section 73 & 74
• Paid in proportion to paid up capital
• Amount of dividend to transfer in separate
bank account within five days
• Paid within 30 days
• Unclaimed dividend to transfer in separate
bank account within seven days from expiry of
thirty days
Investor education and protection fund

• Maintained by Central Government

• Grant from CG by appropriation in parliament
• Donations
• Unpaid amount for seven years
• Interest upon balance
 Uses of funds
• Refund of amount to investors
• Promotion of investor education
• Reimbursement of legal expenses
• Any other purpose incidental thereto