CIMA BA4 · Chapter 13 · Question 10 of 10
Under English law, a private company is solvent. Its accumulated realised profits are £180,000 and its accumulated realised losses are £70,000. It also has an unrealised revaluation gain of £50,000. What is the maximum dividend it may lawfully pay?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £110,000
Explanation
Under section 830 of the Companies Act 2006, distributions may only be made out of profits available for the purpose: accumulated realised profits (not previously distributed or capitalised) less accumulated realised losses (not previously written off). £180,000 - £70,000 = £110,000. The unrealised revaluation gain of £50,000 cannot be distributed. (A public company must also satisfy the net assets test in section 831.)
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