I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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The terminology of dividend payments can be confusing, since they may be expressed either in the form, 

of 'x cents per share' or of 'y%. In the latter case, the meaning is always 'y% of the par value of the 

shares in issue'. For example, suppose a company's issued share capital consists of 100,000 50c 

ordinary shares which were issued at a premium of 10c per share. The company's statement of financial 

position would include the following. 

 

 

$      

Ordinary shares: 

100,000 50c ordinary shares 

50,000

Share premium account: 

(100,000  10c) 

10,000

If the managers wish to pay a dividend of $5,000, they may propose either of the following. 

(a) 

A dividend of 5c per share (100,000  5c = $5,000) 

(b) 

A dividend of 10% (10%  $50,000 = $5,000) 

Not all profits are distributed as dividends; some will be retained in the business to finance future 

projects.