Auditors duty regarding Divisible profit & Dividend | Auditing| IPCC|Bcom Sem 6 |

AUDITOR'S DUTIES REGARDING DIVISIBLE PROFITS
It is of course, very difficult to ascertain true profits of business, particularly in case of joint stock companies. But the auditor has to see whether the divisible profit has been ascertained on the basis of (i) generally accepted accounting principles (ii) Provisions of Indian Companies Act (iii) Provisions of Memorandum and Articles of Association and (iv) decisions given in important legal cases.
(1) He has to see that the divisible profit has been ascertained on the above four basis. Where the decision in a legal case comes in conflict with the provisions of Companies Act, the provisions of Act must be complied with.
(2) Dividend is paid out of profits and generally it is paid out of revenue profit and not out of capital profits.
(3) If capital profit is to be utilised in payment of dividend, then he should see that the conditions laid down in Foster Vs New Trinidad Case are fulfilled viz. (i) It is permitted by the Articles of the company (ii) The profit is actually realised (iii) The surplus remains after all the assets and liabilities have been revalued.
(4) The arrears of depreciation of past years must the provided for out of the current year's profits and the surplus only can be utilised for payment of dividend.
(5) If there are past losses, then either the amount of losses or the actual depreciation written off must be set off against the current year's profit before declaring dividend.
(6) According to Stapley Vs. Read Brothers, if an asset which was written off in the past is written up and is shown at its true value then the appreciation can be utilised for writing off the past losses.
(7) The directors have full discretion in the matter of not declaring dividend and transferring the entire profit to reserve if it is in the interest of the company. Even the shareholders cannot compel them to declare to dividend. In India, it is compulsory for the company to transfer a certain percentage of profit to reserves before declaring dividend.
(8) The auditor should check that the dividend is declared out of the true profits of the company and shareholder’s capital is not used for the purpose.
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[@aryansoni3295]

sir your videos are helping me a lot in revision for exam hats off to you 😇👍🙌

[@_ineligible_bachelor]

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[@eted276]

ਅੱਜ ਮੇਰਾ ਏਡਮ ਹੈ ਪਰ ਅਪਕੀ ਵੀਡੀਓਜ਼ ਬਹੁਤ ਹੇਲੋਫੁਲ ਹੈ ਮੇਰੇ ਲੀਏ।ਠੰਕ ਯੂ ❤

[@Hardik_0129]

The profit which is available to be disturbed among the share holders in the form of dividend 😊

[@Lucifer-zz7pk]

Very good explanation

[@_ineligible_bachelor]

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[@lethal_eyes]

Sir please
Producer company or dormant company ka difference pe video bana dijiye

[@_ineligible_bachelor]

Noted
Will try to make a video or else I will definitely upload the content in easy language in comment section

[@iiiishika17]

Sir can you make some imp topic videos on Income Tax sem 6 ?

[@_ineligible_bachelor]

Sorry Income tax videos is not in my plans for time being

[@laxmanpatel3822]

Sir isme baki sabh topic cover nai hue jo chapters me h

[@_ineligible_bachelor]

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[@fularamchaudhary4653]

Sir it's only duties regarding divisible profit not on dividend 😅

[@_ineligible_bachelor]

K

[@getit2333]

Exactly 💯... He is fooling students