What is the adjustment of proposed …

s per the latest amendment, the proposed dividend will not be shown in the Balance Sheet. It will be mentioned in the adjustments only.

Proposed Dividend of the Current Year will not be considered while preparing the Cash Flow Statement.

Proposed Dividend of the Previous year will be added to net Profit under Operating Activities and the same amount (Proposed Dividend of the Previous Year) will have to be deducted under Financing Activities in the Cash Flow Statement.

(Dear CBSE Students, please refer to CBSE to get a final update on this matter as it is understood from believable sources that the Current Exam (March 2019) will be based on the old concept, which is as shown in the CBSE published accountancy text. Sorry for the previous remark. The old concept as per the CBSE published text books, “The previous year proposed dividend will be shown as outflow under financing activity considering the said proposed dividend is paid in the current year. Also, the current year Proposed dividend will not be considered as outflow as the payment of the same happens only in the next year. Hence the proposed dividend of the current year will be added back to Net Profit to calculate the Net Profit before Tax and Extraordinary items.)

Please note details of the amendment as below;

Section B: Unit 5 - Cash Flow Statement - effect of the amendment on the treatment of

proposed dividend:

(a) Dividend proposed for the previous year will be an outflow for cash, unless otherwise stated,

on the assumption that the proposed amount has been approved by the shareholders in the

AGM.

(b) No effect is given to Proposed Dividend for the current year as it is not provided for and is a

contingent liability.

(c) Any unpaid dividend is transferred to Dividend Payable Account / Unpaid Dividend Account

which is shown in the Balance Sheet of the current year as Other Current Liabilities under

Current Liabilities.