Dividend Policy

Meaning of Dividend

Dividend is a sum of money paid regularly (annually) by a company to its shareholders out of its profits(or reserves).
Dividend can be defined as a distribution of a portion of a company's earnings to a class of shareholders as decided by the board of directors. Dividend can be issued in the form of cash payments, or shares or any other property. A company's dividend policy refers to the way it distributes profits to its shareholders in the form of dividends. This can include how frequently the dividends are paid (e.g. quarterly, semi-annually, annually), the amount of the dividend payments, and any conditions or criteria that must be met in order for the dividends to be paid. There are several factors that can influence a company's dividend policy, including its financial performance, growth prospects, and cash flow. Some companies choose to pay dividends consistently over time, while others may adjust their dividend payments based on their financial performance or other considerations. There is no one-size-fits-all approach to dividend policy, and different companies may adopt different strategies based on their specific circumstances. Some companies may prioritize paying dividends to shareholders, while others may prefer to reinvest profits back into the business in order to support growth and expansion. Ultimately, a company's dividend policy is one of several factors that shareholders should consider when evaluating an investment. It is important for investors to carefully consider the dividend policy of a company before making an investment, as well as the company's overall financial health and growth prospects.

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Rules of Debit and Credit: Made Simple

Rules of Debit and Credit are very simple in accounting. All the accounting heads in the business are basically divided into three types of accounts and rules of debit and credit are formed.
Personal Accounts

• These accounts represents individual persons and organisations. Debtors and Creditors are recorded under personal accounts.

         Rules:

         Debit, The Receiver: It means the person who receives some value or cash should be debited.

         Credit, The Giver: It means the person who gives some value or cash should be credited. 

Real Accounts

• These accounts represents the value of assets. All the assets come under this account, whether tangible or intangible. 

          Rules:

          Debit, What Comes In: It means any assets that comes into our possession should be debited.

          Credit, What goes Out: It means any assets that goes out from us should be credited.

Nominal Accounts

• These are the accounts which relates to financial transactions of a business. It represents the revenues, expenses, gain and losses of business.

     

          Rules:

          Debit, All Expenses and Losses: It means all the items of expenses and losses should be debited.  

          Credit, All Incomes and Gains: It means all the items of incomes and gains should be credited.

 Examples: 

• Purchase of goods from Mr. Y for 5,000. 

        Purchase Account.....................Dr                                         5,000

                            To Mr. Y Account                                                                               5,000  

       (Being goods purchased from Mr.Y on credit)             

Here, Goods have been purchased, therefore goods being the asset belongs to Real Accounts and the rule Debit, What comes in applies here. The value of goods have been debited with head Purchase Account. 

Similarly, Mr. Y belongs to Personal account and the Rule Credit,The Giver applies here. 

• Purchase of furniture for 20,000 in cash.          

         Furniture Account......................Dr                                        20,000
                            To Cash Account                                                                                 20,000
         (Being furniture purchased in Cash)
Here, Furniture is an asset which is purchased, Furniture comes in so we debit the Furniture Account. The Rule of Real Account Debit, What Comes In applies here.
Similarly, we paid Cash(asset) for purchase of Furniture, It means Cash goes out. The Rule of Real Account Credit, What goes out applies here.

• Rent of Shop paid to Landlord 30,000. 

         Rent Account..........................Dr                                             30,000

                           To Cash Account                                                                                  30,000

       (Being shop rent paid to landlord)

Here, Rent is an item of expense which belongs to Nominal Account. So the rule Debit, All Expenses and Losses applies here.

Similarly, Cash, being the Real Asset, goes out. So the Rule Credit, What Goes Out applies here.

• Commission received in Cash 15,000.

         Cash Account...........................Dr                                           15,000

                            To Commission Account                                                                      15,000

        (Being commission received)

Here, Cash comes in, so it is debited as we know we should debit the assets that comes in. 

Similarly, Commission received is an income which belongs to Nominal Account therefore the rule Credit, All Incomes and Gains applies here. 

• Cash Deposited into Bank 45,000

            Bank Account...............................Dr                                   45,000

                              To Cash Account                                                                                   45,000

        (Being Cash Deposited into Bank)

Here, Bank, being the personal account, is debited being the Receiver. The rule Debit, The Receiver applies here. 

Similarly, Cash goes out into bank, therefore Cash is credited. The rule Credit, What goes out applies here. 

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Hey, How do you Read?

Reading Skills
Reading Skill is the most basic trait or requirement which is needed to excel in any field. Reading Skills are specific abilities which empowers an individual enabling him to:

• draw the meaning out of a written form of language
• interpret the meaning with fluency and comprehension, and
• form the mental picture of the written message.

Prominence of Reading Skills

• Improves your writing, speaking and presentation skills.
• Develops your ability to think critically and make connections with our own lives.
• Builds your knowledge in variety of areas depending on subject matter of what we read.
• Fosters your writing and language skills to excel in academic and professional career.

Tactics to unfold Reading Skills
For quick and constructive reading following tactics should be followed:

• Sneak peek or Preview the title, headings, captions to pick up the general idea of the content and structure of a reading material.
• Predict or forecast the content structure and main idea of the text or a writing based on prior knowledge and clues appearing in the text like pictures,illustrations,etc.
• Flick through the text before actual reading so that a general idea of the text can be perceived and also previous predictions can be confirmed.
• Conjecture the meaning of new or unknown words or text from the words accompanying it.For example: "We wish him happiness and prosperity on the occasion of his birthday." Here, meaning of word prosperity can be conjectured or guessed from the accompanying word 'happiness'.
• Paraphrasing is the ultimate tactic to understand the meaning of the text with clarity. Difficult portions and sections of the text can be rephrased into simple words to give it a simple and clear meaning.          

Other Skills 

• Increasing reading activities can help build vocabulary for enhancing the reading skills.For building vocabulary informative magazines and newspapers are also useful.
• Using dictionary for new or difficult words and making notes of those words with meaning helps in retaining it for long time.
• Instead of reading a text word-by-word form a grouping of words and habituate yourself viewing the meaning of sentence in blocks.
• For increasing the focus and maintaining consistent eye motion using of fingers to point at the text while reading is useful.

As a closure,Reading good materials and texts feeds the mind with healthy ingredients. Cultivating the reading culture in ourselves upgrades our intellectual capacity. Be a Reader, Be a Leader. :-)

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Matters which only shareholders can sanction at the general meeting.

The matters which only shareholders can sanction at the general meeting are:
 1. Appointment of auditors and fixation of remuneration of auditors in the annual general meeting.
 2. Declaration of dividend
 3. Appointment of relative of Directors to an office or a place of profit in the company. 
 4. Sale, Lease or disposal of the whole of the company's undertakings or a substantial part of it and donations above a certain limit. 

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Borrowing Cost

Borrowing Cost means any charge or expenses on debt obligation or borrowed funds which include the following:
      a. Interest and other similar costs 
      b. Amortization of Discount on Issue of Debenture

      c. Commitment Charges
      d. Interest in the nature of finance lease.
      e. Exchange difference in the nature of finance. 
Borrowing cost for a business tends to rise during time of economic expansion and inflation when prevailing market interest rates rises. 
Treatment of Borrowing cost: 

 1. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are included in the cost of the asset. Such borrowing cost should be capitalized with the cost of Qualifying Asset. 
             Journal Entry: Cost of  Qualifying Asset A/c...............Dr
                                                 To Interest or Borrowing Cost A/c
                                (Being amount of borrowing cost included in the cost of asset) 
2. Borrowing cost on other items (other than qualifying asset) are recognized as an expense and shown in the debit side of Profit and Loss Account. 
              Journal Entry: Profit and Loss A/c...........Dr
                                              To Borrowing Cost A/c
                                            (Being amount written off)

Qualifying Asset: 
  Qualifying Assets are those asset which take substantial time to get ready for its intended use or sale. The time period of 12 months can be considered as the substantial time period. 
 Examples of Qualifying Asset: 
  Plant and Machinery, Building, Ships, Alcohol or Liquor
                        

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Kinds of Share Capital

1. Authorized or Registered Share Capital:
    It is the maximum value of securities (or share capital) that the company is authorized to issue.It is mentioned in the capital clause of  Memorandum of  Association (MOA) of the company. It is also called as Nominal Capital. 

2. Issued Share Capital:
     It is that part of Authorized Share Capital which is offered to public for subscription. It is computed at nominal value. 

3. Subscribed Share Capital:
      It is that part of Issued Share Capital which has been subscribed or taken up by the purchaser of shares or securities at nominal or face value and has been allotted. This capital may also be referred to the part of Issued share capital for which application for subscription has been received from the public. 


4. Called Up Share Capital: 
     It is that part of subscribed share capital that have remained fully or partially unpaid and the holders of such shares are called upon to pay the balance. In other words, it is the amount which the shareholders are required to pay on the value of shares held by them. 

5. Paid Up Share Capital: 
      It is that part of the subscribed share capital for which money or any other consideration has been received by the company in respect of the shares subscribed. It also refers to the amount of company's capital funded by shareholders. 



       

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