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.

Question

Quizplus · Accepted Answer

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.

A Company with a Constitution That Provides for the Declaration