Day: May 10, 2020

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:

1. £4,000
2. £11,000
3. £12,000
4. £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

1. Not correct
2. 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.
3. Not correct
4. Not correct

    

 

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