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Declaration of dividend 1-increase equity 2- reduce working capital 3- increase working capital 4- increase assets

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Question added by Ahmed kandil , Cost Controller , Battour Holding Cpompany
Date Posted: 2015/03/10
VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

Answer option : >>>>>>>>>>>> Reduce working capital

[Result in immediate disbursement --Bank balance will reduce and will result in decrease in working Capital]

Anas  Dawah
by Anas Dawah , Senior Internal Auditor , Talal Abu-Ghazaleh Global (TAGI)

B)

the entry at declaration date 

Dr. Retained earnings , Cr. Dividends payable 

this means that equity will be decreased and current Liabilities will be increased . So working capital will be reduced.

Narayanan sargunan
by Narayanan sargunan , Financial Controller , Almansoori Petroleum Industries

At the time of declaration (Cash Dividend)

1.Increase Liabilities (lead to reduction in Working Capital)

2.Decrease Equity

At the time of declaration (Stock Dividend)

1.No net effect on Equity

2. No effect in Working Capital

 Note:

At time of declaration of dividend, no effect on Bank account

 

 

Ahmad Abbas
by Ahmad Abbas , Accountant , telecomegypt

2 Is correct answer

In the declaration date

Dr / Retained Earning 

   Cr / dividends Payable

in the distribution date

Dr / dividends payable 

    Cr / Cash

 

SHIBU THOMAS PULICKAL
by SHIBU THOMAS PULICKAL , Chief Accountant , Steel Trading Group (STG)

Declaration dividend will reduce the working Capital

Working Capital= Current Assets - Current Liabilities.Decrease in working capital because it will increase the liability.  

Muhammad Sajjad
by Muhammad Sajjad , Chief Accountant , Hassan Kabbani Est. for Gen. Const. of Buildings (IKK Group of Companies)

Agrred with option -2

If equity will be decreas then working capital will be reducee.

 

FITAH MOHAMED
by FITAH MOHAMED , Financial Manager , FUEL AND ENERGY CO for transportion petroleum materials

2->>>>>>>>>>>>>> reduce working capital

Saifullah Shirazi
by Saifullah Shirazi , Senior Accountant , Suraj Cotton Mills Limited

2 - Reduce Working Capital As you have to recognize Dividend Payable which is current liability.

and increase in current liability will reduce Working Capital 

Muhammad Asif
by Muhammad Asif , Accountant , Prestige Plastics LLC

decrease or reduce working capital

Shabbir Hatim Ali Habib
by Shabbir Hatim Ali Habib , Accountant , AL MAHA OFFICE SUPPLIES

Increase Assets of Company

 

 

 

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