Accounting Multiple Choice Question – 3 May 2020

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

apple devices books business coffee
Photo by Serpstat on Pexels.com

A company has declared a final dividend for the year ended 31 March and proposes to pay it on 10 May.

Which of the following is the correct treatment of this item in the financial statements for the year ended 31 March?

Select ONE answer:

  1. Show the amount of the dividend as an expense in the profit and loss account and as a current liability in the balance sheet.
  2. Show the amount of the dividend as a deduction in the profit and loss appropriation account and as a current liability in the balance sheet.
  3. Show the amount of the dividend as a deduction in the profit and loss appropriation account and reduce the bank balance shown in the balance sheet accordingly.
  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 2

  1. Not correct – A dividend is an appropriation of profit, not an expense.
  2. Correct – Dividends are a share of profit not an expense. As the dividend is not yet paid but will be paid within one year it is a current liability.
  3. Not correct – The bank balance won’t be reduced until the dividend is paid.
  4. Not correct

 

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.