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Dividend account for a company is real/nominal/personal account ?
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Dividend account for a company is real/nominal/personal account ?
Dividend Account for a Company
A company may decide to distribute a portion of its profits to its shareholders in the form of dividends. The dividend account for a company is a type of nominal account that records the amount of dividends paid to shareholders during a particular period. A nominal account is one that records expenses, losses, incomes, and gains, and is closed at the end of the accounting period.
Nature of Dividend Account
The dividend account is a nominal account because it records the amount of dividends paid to shareholders during a particular period. It is not a real account because it does not record any asset, liability, or capital of the company. It is also not a personal account because it does not record any transaction between the company and a particular person or entity.
Recording of Dividend Account
The dividend account is credited whenever the company pays dividends to its shareholders. The amount of the dividend is debited to the retained earnings account or the profit and loss account, depending on the company's dividend policy. The retained earnings account is debited if the company pays dividends out of its accumulated profits, while the profit and loss account is debited if the company pays dividends out of its current year's profits.
Impact on Financial Statements
The dividend account has an impact on the company's financial statements. When the company pays dividends to its shareholders, its retained earnings decrease, which in turn reduces its equity. This reduction in equity is reflected in the company's balance sheet. The profit and loss account is also affected because the payment of dividends reduces the company's profits for the year. This reduction in profits is reflected in the company's income statement.
Conclusion
The dividend account for a company is a nominal account that records the amount of dividends paid to shareholders during a particular period. It is not a real account or a personal account. The dividend account is credited whenever the company pays dividends to its shareholders, and the amount of the dividend is debited to the retained earnings account or the profit and loss account. The payment of dividends has an impact on the company's financial statements, as it reduces the company's equity and profits for the year.
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Dividend account for a company is real/nominal/personal account ?
Nominal
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Dividend account for a company is real/nominal/personal account ?
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Dividend account for a company is real/nominal/personal account ? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Dividend account for a company is real/nominal/personal account ? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Dividend account for a company is real/nominal/personal account ?.
Dividend account for a company is real/nominal/personal account ? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Dividend account for a company is real/nominal/personal account ? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Dividend account for a company is real/nominal/personal account ?.
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