Dividend Payable

Dividend Payable Definition

Dividend payable is that portion of accumulated profits that is declared to be paid as dividend by the board of directors of the company. After such declaration, it is due to be paid to the shareholders of the company. Until the time such dividend declared is paid to the concerned shareholder, the amount is recorded as dividend payable in the head current liability on the company’s balance sheet.

In simple words, Dividend payable is the dividend approved by the shareholders in the annual general meeting. It needs to be paid by the company within the specified statutory due days. The calculation methods are different for a different class of shares and based on their preference.

Dividend Payable

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Dividend Payable Examples

Example #1

ABC Limited is having an equity share capitalEquity Share CapitalShare capital refers to the funds raised by an organization by issuing the company's initial public offerings, common shares or preference stocks to the public. It appears as the owner's or shareholders' equity on the corporate balance sheet's liability side.read more of $ 1 million, consisting of 1 lakh shares with a face value of $ 10 each. The company proposed a 10% dividend at the end of the year. Calculate the Dividend payable.

Solution:

Dividend Payable Example 1

= $ 10 * 10% * 100,000 shares

= $ 100,000

Example #2

Equity share capital = $ 1000,000 , consisting 1 lakh shares  of $ 10 each.Paid Up share capital = $ 750,000 , consisting 75000 shares of $ 10 each. Dividend Declared = 10%. Calculate dividend payable by the company.

Solution:

Dividend Payable Example 2

= 75000 shares * 10 % * $ 10 = $ 75,000.

Example #3

For ABC Limited, below are the particulars: Equity Share capital = $ 1000,000 consisting of 100,000 shares of $ 10 each. 11% preference share capital of $ 500,000, consisting of 5000 shares of $ 100 each. The company declared a 10% dividend for the equity shares. Please calculate dividend payables.

Solution :

Calculation of Dividend Payable to Preference share capital

Dividend Payable Example 3

= 5000 shares * $ 100 * 11%

=$ 55000

Calculation of Dividend Payable to Equity Share Capital 

Example 4

= 100000 shares * $ 10 * 10%

= $ 100,000

Example 4.2jpg

Thus total dividend payable by the company = $ 55000 + $ 100000 = $ 155000

Example #4

Mr. A and Mr. B are subscribers to the equity share capital of Facebook, Inc. Mr. A has subscribed to 100 shares of $ 50 each, paid $ 23 for each share. Mr. B has subscribed for 150 shares of $ 50 each, paid $ 20, call not paid of $ 3 each. At the end of the year, the company declared a dividend of 5%. Please calculate the dividend payable to Mr. A and Mr. B.

Solution:

The calculation for Mr. A

Example 5

Thus, dividend payable on the 100 shares = $ 23 * 100 shares * 5%

= $ 115

Mr. B has subscribed for 150 shares, and paid up the value of the same is $ 23, but he has paid only $ 23. The dividend will not be paid on the calls not paid by the shareholdersShareholdersA shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company. The ownership percentage depends on the number of shares they hold against the company's total shares.read more.

The calculation for Mr. B 

Dividend Payable Example 5.1jpg

= 150 shares * $ 20 * 5%

= $ 150

Thus dividend payable= $ 115 + $ 150 = $ 265

Example #5

ABC Limited is having 12% Cumulative preference shares of $ 5 million, consisting of 50,000 shares of $ 100 each. The company had not declared a dividend for the last 2 years. This year the company had declared a 12% dividend for the equity shares. Please calculate the dividend payable to the preference shareholders this year.

Solution:

Cumulative preference shareholders are eligible to accumulate the dividend every year, even though the company has not declared the dividend. As a result, in the year of declaration, they will receive a dividend for the past years for which dividend was undeclared.

Thus, in the given question, the company had not declared a dividend for the last 2 years, and the company declared dividends this year. Thus, this year, preference shareholders will receive a dividend of 3 years.

Calculation of Dividend Payable

Example 6

= 50000 shares * $ 100 * 12% * 3 years = $ 18,00,000

Thus, ABC limited will have to pay the dividend of $ 18 lakhs this year, including an accumulated dividend of the last 2 years.

Example #6

Mr. A and Mr. B are subscribers to the equity share capital of HSBC Bank. Mr. A has subscribed to 250 shares of $ 20 each, paid $ 13 for each share consisting of $ 3 calls in advance. Mr. B has subscribed for 500 shares of $ 20 each, paid $ 8, call not paid of $ 2 each. At the end of the year, the company declared a dividend of 5%. Calculate dividend payable to Mr. A and Mr. B.

Solution:

The calculation for Mr. A 

Mr. A has subscribed 250 shares, by paying $ 13 for each share. However, Mr. A paid $ 3 in advance.

Dividend always gets paid on the Paid-up capitalPaid-up CapitalPaid in Capital is the capital amount that a Company receives from investors in exchange for the stock sold in the primary market, including common or preferred stock. This considers the sale of stock that an issuer directly sells to the investor & not the sale of stock on the secondary market between investors. read more as and when called by the company. It cannot get paid on any advance calls received by the company.

Thus Mr. A will not be eligible for the call in the advance dividend received by him, dividend payable to Mr. A =  250 shares * $10 %5% = $ 125

The calculation for Mr. B

Mr has subscribed for 500 shares, by paying $ 8 per share. However, Mr. B has not paid $ 2 on the paid-up value of $ 10. The dividend will not be paid on the calls in arrears. Hence, Mr. B will not receive a dividend on call in arrears of $2.

Dividend payable to Mr B = 500 shares * $ 8 * 5%

= $ 200

Thus total Dividend payable = $ 125 + $ 200 = $ 325

Conclusion

Dividend payable must pay obligation on the company, within the specified period and through the authorized banking partners. Moreover, it must be paid under the guidelines set out by the concerned nation’s chief organization, keeping watch on the stock market. Once declared, the dividend will be disclosed under the current liabilityCurrent LiabilityCurrent Liabilities are the payables which are likely to settled within twelve months of reporting. They're usually salaries payable, expense payable, short term loans etc.read more until it is getting paid.

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