CA Inter P1 · Chapter 9 · Question 10 of 10
Case: For the current year, Falguni Textiles Ltd has a profit before depreciation of ₹50,00,000. Depreciation for the year as required by Schedule II is ₹12,00,000. It also has accumulated losses of earlier years of ₹8,00,000. Ignoring any transfer to reserves, the maximum dividend it can declare out of the current year's profit under section 123 is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹30,00,000
Explanation
Section 123 requires dividend out of current year profits to be declared only after providing for depreciation and after setting off previous losses (and depreciation not provided) of earlier years against the current profit. Available profit = 50,00,000 - 12,00,000 - 8,00,000 = ₹30,00,000.
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