A limited company‘s revenue reserves increased from £15,000 at 1 January to £31,000 at 31 December.
If the company earned a profit for the year of £27,000, after tax dividends for the year were?
Select ONE answer:
- £4,000
- £11,000
- £12,000
- £45,000
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 2
- Not correct
- Correct – Earning a profit will increase revenue reserves while paying (or proposing) dividends will reduce revenue reserves. Therefore, revenue reserves at 31 December = revenue reserves at 1 January + profit – dividends. Therefore, £31,000 = £15,000 + £27,000 – dividends. Therefore, dividends = £11,000.
- Not correct
- Not correct
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