How would these be entered in an accounting Journal?

Question

During the year, £150 000 was recieved from the issue of 500 000 new ordinary shares. The only entries made in the accounts to reflect this has been to debit cash at bank with the amount recieved, and to credit proceeds.


The directors propose a dividend of 1.1p per share for the year ended 30 Sep 07. No accounting entries have been made to reflect this. The AGM of the company will take place on 15 Dec 07

No payment has been made or accrued in respect of the redeemable preference share dividend.

Answer 1

1. During the year, £150 000 was recieved from the issue of 500 000 new ordinary shares.
The entry should be:
Dr Cash 150,000
Cr Share capital 150,000

2. The directors propose a dividend of 1.1p per share for the year ended 30 Sep 07. No accounting entries have been made to reflect this. The AGM of the company will take place on 15 Dec 07
With dividends, you have to be very careful with the words you use. If the dividends are merely proposed, as opposed to declared, no journal entry is necessary. But you need to have a note to the financial statements that a dividend has been proposed. Here's an extract from IAS 10 Events after the Balance Sheet Date:

"Dividends
12. If an entity declares dividends to holders of equity instruments (as defined in IAS 32 Financial Instruments: Presentation) after the balance sheet date, the entity shall not
recognise those dividends as a liability at the balance sheet date.
13. If dividends are declared (i.e. the dividends are appropriately authorised and no longer at the discretion of the entity) after the balance sheet date but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the balance sheet date
because they do not meet the criteria of a present obligation in IAS 37. Such dividends are disclosed in the notes in accordance with IAS 1 Presentation of Financial Statements."
If the entity declares the dividend before the balance sheet date, then it's a liability and has to be taken up.

3. No payment has been made or accrued in respect of the redeemable preference share dividend.
Again, a dividend has to be declared to be recognised as a liability. If preference shares have dividends in arrears, they are merely disclosed in the notes to the financial statements. Here's an extract from the site below:
"Owning a share of preferred stock that includes a cumulative dividend still does not guarantee the preferred stockholder a dividend because the company is not liable to pay dividends until they are declared. Having cumulative preferred stock simply reinforces the preference preferred stockholders receive when a dividend is declared. If a company has issued cumulative preferred stock and does not declare a dividend, the company has dividends in arrears. Although not a liability, the amount of any dividends in arrears must be disclosed in the financial statements."