What is Final Dividend?

 When Board of directors of company declares dividend in annual general meeting after finding the real net profit position and financial position through financial statements. That declared dividend  is called final dividend. It is totally different from Interim Dividend because final dividend is based on actual profit instead of estimation of future profit.

Accounting treatment of interim dividend in final accounts of company :-

 To show in profit and loss appropriation account : If final dividend is given outside the trial balance, we will calculate it on the basis of equity shares. It will be debited to the profit and loss appropriation account after deducting interim dividend which has already shown in trial balance.

To show in balance sheet : We will also show same final dividend to the liabilities side of  balance sheet under the heading of provisions because it is just like current liabilities because next year, it will be show in the trial balance when we will pay it.

Final Dividend Problem

Adjustments outside the Trial balance

 Wholesales Traders Pvt. Ltd. company declared final dividend @ $ 5 per share after seeing its final profitability position.

Trial balance shows

interim dividend 16800

issued capital (of Rs. 10 per ) Rs. 420000

Solution

To show 420000/10 X 5 - 16800 = 193200 in profit and loss appropriation account and in the liabilities side of balance sheet as final dividend payable.