CA Inter P2 · Chapter 7 · Question 8 of 9
Under the provisos to section 123(1), before declaring dividend for the current financial year a company must:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Set off carried over previous losses and depreciation not provided in previous years against the profit of the current year
Explanation
A proviso to section 123(1) requires carried over previous losses and depreciation not provided in previous years to be set off against the current year's profit before any dividend is declared for that year. There is no compulsory transfer to reserves; the company may transfer such percentage of profits as it thinks appropriate.
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