Sunday, 19 March 2017

Accounting for unclaimed cash dividend

Lets start with an example. 

A company had 100000 shares outstanding (par value of Rs 1). The company plans to declare a 1:1 dividend. 

The following entry is made at the closure of financial statements

Provision for proposed dividend                                          100000
Appropriation to PL account                       100000

In the first quarter of the next financial year, the dividend is declared.

The entry is

Provision for proposed dividend                  100000
Dividend Payable                                                                100000

On the date of payment, the company is unable to pay a few shareholders amounting to Rs 10000, due to technical issues. 

The entry for the payment is

Dividend Payable                                        100000
Unclaimed dividend                                                             10000
Cash                                                                                   90000

And another entry for earmarking the fund for unclaimed dividend

Cash earmarked for  unclaimed dividend         10000
Cash                                                                                    10000

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