Accounting Multiple Choice Question – 2 May 2020

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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A dividend is . . .?

Select ONE answer:

  1. a share of a company‘s profit.
  2. interest paid on a company‘s borrowings.
  3. always paid to banks and other creditors.
  4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

  1. Correct – Dividends are paid by companies to their shareholders (both owners of ordinary shares and owners of preference shares, where applicable) as a return on the investment they have made in the company.
  2. Not correct – Interest paid by a company on its borrowings is an expense which is deducted when calculating profit whereas dividends are an appropriation of the profit earned by a company.
  3. Not correct – Dividends may be paid by a company to banks and other creditors, but only if they are shareholders in the company.
  4. Not correct

 

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