Maharashtra Board Class 12 Secretarial Practice Important Questions Chapter 10 Dividend and Interest

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 10 Dividend and Interest Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 10 Dividend and Interest

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
Dividend is a part of ______________ distributed to the shareholders.
(a) Profit
(b) Reserve
(c) Unpaid Capital
Answer:
(a) Profit

Question 2.
Dividend is an income on investment in ______________
(a) Debentures
(b) Loan
(c) Shares
Answer:
(c) shares

Question 3.
Unpaid or Unclaimed dividend shall be transferred to ‘Investors Education and Protection Fund’ on expiry of ______________ years.
(a) Three
(b) Seven
(c) Five
Answer:
(b) Seven

Question 4.
The dividend declared between two Annual General Meetings is known as ______________ dividend.
(a) Interim
(b) Final
(c) Annual
Answer:
(a) Interim

Question 5.
The ______________ recommends the final dividend.
(a) Shareholders
(b) Board of Directors
(c) Promoters
Answer:
(b) Board of Directors

Question 6.
______________ is the dividend declared at the Annual General Meeting.
(a) Interim dividend
(b) Final dividend
(c) Unpaid dividend
Answer:
(b) Final Dividend

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Dividend coupon	(a) Return of investment of shareholders
(2) Dividend warrant	(b) Declared at Annual General Meeting
(3) Dividend	(c) Share certificate holder
(4) Final Dividend	(d) Share warrant holder
(5) Interim Dividend	(e) Return on debentures
	(f) Declared between two Annual General Meetings
	(g) Bonus Shares
	(h) Declared at an extraordinary general meeting
	(i) Special resolution
	(j) Debenture certificate holder

Answer:

Group ‘A’	Group ‘B’
(1) Dividend coupon	(d) Share warrant holder
(2) Dividend warrant	(c) Share certificate holder
(3) Dividend	(a) Return of investment of shareholders
(4) Final Dividend	(b) Declared at Annual General Meeting
(5) Interim Dividend	(f) Declared between two Annual General Meetings

Question 2.

Group ‘A’	Group ‘B’
(1) Interim dividend	(a) Cannot be paid in kind
(2) Dividend account	(b) Cannot be paid out of reserves
(3) Declaration of dividend	(c) Owners of the company
(4) Interest	(d) Board of Directors
(5) Listed Company	(e) Schedule Bank
	(f) Dividend as a per-share basis only
	(g) IEPF
	(h) Debenture holders
	(i) Rate of dividend is high
	(j) Shareholder’ approval

Answer:

Group ‘A’	Group ‘B’
(1) Interim dividend	(b) Cannot be paid out of reserves
(2) Dividend account	(e) Schedule Bank
(3) Declaration of dividend	(j) Shareholder’ approval
(4) Interest	(h) Debenture holders
(5) Listed Company	(f) Dividend as a per-share basis only

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A dividend remaining unpaid to shareholders even after the expiry of 30 days of its declaration.
Answer:
Unpaid dividend

Question 2.
People who recommend the rate of dividend.
Answer:
Board of directors

1D. State whether the following statements are true or false.

Question 1.
The final dividend is paid on the actual profits that arrived after the closure of books of accounts.
Answer:
True

Question 2.
The interim dividend is declared before the preparation of the final accounts of the company.
Answer:
True

Question 3.
The higher the risk, the lower is the interest.
Answer:
False

Question 4.
Auditors’ opinions should be taken before declaring an Interim dividend.
Answer:
True

Question 5.
‘Unpaid Dividend Account’ is opened in a private Bank by the company.
Answer:
False

1E. Find the odd one.

Question 1.
Equity Shares, Preference Shares, Deposit Holders
Answer:
Deposit Holders

Question 2.
Interest, Dividend warrant, Dividend Mandate
Answer:
Interest

Question 3.
Unpaid/Unclaimed Account, IEPF, Deposits
Answer:
Deposits

Question 4.
ECS, NEFT, Cash
Answer:
Cash

1F. Complete the sentences.

Question 1.
Dividend can be paid out of ______________
Answer:
capital profits

Question 2.
Dividend which is approved by shareholders should pass ______________
Answer:
ordinary resolution

Question 3.
The dividend declared by company but not been paid or claimed by 9 shareholders is called ______________
Answer:
unpaid/ unclaimed dividend

Question 4.
Rate of interest is expressed as annual percentage of ______________
Answer:
principal

Question 5.
______________ is paid to the creditor of the company.
Answer:
Interest

Question 6.
Any amount in ‘Unpaid Dividend A/c’ for 7 years should be transferred to ______________
Answer:
IEPF

1G. Answer in one sentence.

Question 1.
Who declares the final dividend?
Answer:
The final dividend is declared by shareholders.

Question 2.
Which are the two types of dividend?
Answer:
The two types of dividends are (a) Interim and (b) Final.

Question 3.
Name the electronic mode of payment of dividends.
Answer:
The electronic mode of payment of dividends is ECS (Electronic Clearing Services), NEFT (National Electronic Fund Transfer).

Question 4.
What is the full form of IEPF?
Answer:
IEPF means Investors Education and Protection Fund.

1H. Correct the underlined word/s and rewrite the following sentences.

Question 1.
The dividend is payable in kind.
Answer:
The dividend is payable in cash.

Question 2.
Unclaimed/Unpaid dividends should be transferred to Dividend Account.
Answer:
Unclaimed/ Unpaid dividends should be transferred to Unpaid Dividend Account.

Question 3.
The interim dividend rate is higher than the Final Dividend.
Answer:
The interim dividend rate is lower than the Final Dividend.

Question 4.
The rate of dividend is expressed as an annual percentage of the principal.
Answer:
The rate of interest is expressed as the annual percentage of the principal.

Question 5.
Dividends cannot be declared out of reserves.
Answer:
A dividend cannot be declared out of capital.

Question 6.
The dividend is declared at the Board Meeting.
Answer:
The dividend is declared at the Annual General Meeting.

Question 7.
The dividend Mandate should be sent to the registered address of the shareholder.
Answer:
A dividend Warrant should be sent to the registered address of the shareholder

Question 8.
Interest is a charge on capital profits.
Answer:
Interest is a charge on profits.

Question 9.
Interest is paid to the owners of the company.
Answer:
The dividend is paid to the owners of the company.

1I. Arrange in Proper Order.

Question 1.
(a) Declaration of Dividend
(b) Sources of Dividend
(c) Payment of Dividend
Answer:
(a) Sources of dividend
(b) Declaration of Dividend
(c) Payment of Dividend

Question 2.
(a) Payment of dividend to shareholder’s banker
(b) Dividend Mandate
(c) Company authorizes
Answer:
(a) Dividend Mandate
(b) Company authorizes
(c) Payment of dividend to shareholder’s banker

2. Explain the following terms/concepts.

Question 1.
Dividend Warrant.
Answer:
It is an instrument sent by the company to the shareholder. It is a document that reflects shareholder is entitled to receive a dividend or not. It contains the name and address of the registered shareholder. In other words, it is the order of payment in which dividend is paid.

3. Study the following case/situation and express your opinion.

1. VMCL Co. Ltd. decides to pay the final dividend.

Question (a).
Is the rate of final dividend lower than interim dividend which is already paid by them?
Answer:
No, as the interim dividend is a part of the first half of the profit, its rate is lower than the final dividend.

Question (b).
Who has the authority to declare the final dividend?
Answer:
The Board of Directors has the authority to declare the final dividend.

Question (c).
Can it be paid out of capital profit?
Answer:
Yes, the final dividend can be paid out of capital profits, if it fulfills certain statutory conditions. For eg. Capital profits should be released in cash.

2. Mr. Dutch has given a loan to the VMCL Co.

Question (a).
What is Mr. Dutch to VMCL Co.?
Answer:
Mr. Dutch is the creditor for the VMCL Co.

Question (b).
What will Mr. Dutch receive in return?
Answer:
Mr. Dutch will receive interest in return.

Question (c).
Will Mr. Dutch receive interest even if the company is in loss?
Answer:
Yes, Mr. Dutch will receive interest even if the company incurs loss because it is not linked with profits or loss of the company.

3. Mr. B is the shareholder who wants to get dividend credited directly in his bank account.

Question (a).
What form is Mr. B required to fill to get the dividend credited directly into this account?
Answer:
“Dividend Mandate” is the prescribed form required to fill to get dividends credited directly into this account.

Question (b).
If Mr. B has sold his partial shares, will he receive the dividend?
Answer:
No, If Mr. B has sold his partial shares, he will be receiving dividend on the remaining shares.

Question (c).
What is the benefit of Dividend Mandate?
Answer:
The benefit of dividend mandate is it saves time, cost and efforts.

4. Answer in brief.

Question 1.
Explain different modes of payment of dividend.
Answer:
Dividend is either paid in cash or by cheque or warrant or by electronic mode. Dividend is paid to the shareholders. Following are the modes of payment of dividend:
(i) Dividend Warrant:
It is a cheque sent by a company to a shareholder for payment of dividend to the registered address of the shareholder.

(ii) Dividend Mandate:
A shareholder can also receive dividend directly in the bank account for which the shareholder has to send a request to the company in the prescribed form called ‘Dividend Mandate’. Dividend mandate authorizes the company to pay dividend directly to shareholder’s bank account.

(iii) Electronic Mode:
Company can also use electronic mode to pay dividends.
It is mandatory for the listed company to use electronic mode of payment approved by RBI such as ECS (Electronic Clearing Services), NEFT (National Electronic Fund Transfer).
Banks should also make necessary arrangements with other banks in collaboration for paying dividend through Dividend Warrants at par.

5. Justify the following statements.

Question 1.
Dividend cannot be paid on calls i.e. in advance.
Answer:

Dividend is an unconditional payment made out of company’s profit.
It is paid out of current profits or profits of the previous financial year.
Dividend once approved and declare by shareholders cannot be cancelled.
Once the Annual Accounts of previous year has been approved in AGM the dividend of the previous year cannot be declared.
Thus, it is rightly said that dividend cannot be paid on calls i.e. in advance.

Question 2.
Dividend can be declared even if a company suffers loss in that particular period.
Answer:

Dividend is paid out of company’s profit i.e. out of current profits, profit of any previous year, out of capital profits and money provided by central or state government.
Every year the company transfer part of its profit to different reserves.
Dividend may be declared from capital profit i.e. selling company’s assets.
Company may utilise accumulated profit and reserves in absence of profit.
Government also provides funds to company under certain schemes.
Thus, it is rightly said that dividend can be declared, even if a company suffers loss in that particular period.

Question 3.
The rate of interim dividend is lesser than final dividend.
Answer:

Final dividend is declared at the end of the financial year whereas Interim dividend is declared between two annual general meetings.
Interim dividend is declared when the company makes good profit in the first half of the financial year.
Interim dividend is declared twice in a year.
Hence the rate of dividend is lower than final dividend.
Thus, it is rightly said that the rate of interim dividend is lesser than final dividend. OR Interest is paid to the creditor of the company.

Question 4.
Payment of interest does not require the passing of a resolution at any meeting.
OR
Resolution need not be passed for payment of interest.
Answer:

Interest is the liability of the company.
It is to be paid to the creditors: of the company.
It is paid every year irrespective of the profits earned by the company every year. It is a charge on profit.
The rate of interest is fixed and pre-determined. Thus, it is rightly said that payment of interest does not require the passing of a resolution at any meeting. OR Resolution need not be passed for payment of interest.

6. Answer the following questions.

Question 1.
Explain legal provisions for the payment of dividends.
Answer:
The term dividend is derived from the Latin word ‘Dividendum’ which means that which is to be divided. A dividend is the portion of the company’s earnings distributed to the shareholders decided and managed by the company’s board of directors. Dividend is a share in distributable profits of the company. A shareholder is entitled to receive the dividend when it is formally declared by the company.

Legal provisions for payment of Dividend are as follows:

According to the provisions of Companies Act 2013, no dividend shall be payable except by way of cash.
Dividend can also be paid through cheque, warrant or by any electronic mode, to the shareholder.
In case of Joint holding of shares dividend, warrant should be sent to the registered address of the first-named joint shareholder as per the Register of Members or to the other joint shareholder whose name has been given to the company.
Company must pay dividend within 30 days from the date of its declaration.
Dividend is payable only to the registered shareholders of the company. Preference shareholders are entitled to receive the dividend before the equity shareholders as per the terms of issue of the preference share.
Dividend will be paid as per the statements furnished by the depository in case of shares held in electronic form. Whereas the shares held in the physical form, will receive dividend as per the names appearing in the Company’s Register of Members.
Default:
- Default is paying a dividend in the given time result in-
- Punishment to every Director of the company.
- Company will be liable to pay the interest at the rate of 12% p.a. till the default continues.

Question 2.
Explain the rules pertaining to the Unpaid/Unclaimed Account.
Answer:
Dividend declared by the company but neither paid to nor claimed by a shareholder within 30 days of its declaration is termed as Unpaid and Unclaimed Dividend. Following rules govern the Unpaid/Unclaimed Dividend:

Unpaid/’Unclaimed should be transferred to ‘Unpaid Dividend Account’ opened in a scheduled Bank by the company.
This transfer should be within 7 (seven) days of the end of 30 days within which payment was to be made. In other words, this transfer should happen within 37 (Thirty-seven) days from the declaration of dividend.
Within 90 (Ninety) days of the transfer of amount in the ‘Unpaid Dividend Account’, the company is required to publish a statement mentioning the name, address and unpaid amount payable to the shareholder. This statement is to be published on the company’s website or any other website approved by the Central Government.
If any person claims the dividend to the company after a long time, then the company is liable to pay the unpaid or unclaimed dividend to the person.
Any amount in the Unpaid Dividend Account of a company that remains unpaid/ unclaimed for a period of 7 (seven) years from the date of such a transfer shall be, transferred by the company to ‘Investors Education and Protection Fund (IEPF).
The claimant of money will have to follow the procedures and submit necessary documents to get a claim from IEPF.

7. Attempt the following.

Question 1.
Explain the legal provisions for the sources of dividends.
Answer:
The term dividend is derived from Latin word ‘Dividendum’ which means that which is to be divided. A dividend is the portion of the company’s earnings distributed to the shareholders decided and managed by the company’s board of directors.
Dividend is a share in distributable profits of the company. Shareholder is entitled to receive the dividend when it is formally declared by the company.

Legal provisions for the sources of dividend
(i) Company can pay dividend for the financial year out of the following:

Current Profits i.e. profits earned by the company for the current year, after providing for depreciation and transfer to Reserves.
Out of profits of the company of any previous financial year, after providing for depreciation.
The money provided by the Central or State Government to pay dividends.

(ii) Dividend can be paid out of Capital Profits:

Capital profits are realized in cash
It mentioned in Articles of Association of the company
It remains as profits after revaluation of all Assets and Liabilities.

(iii) Dividend cannot be paid out of Capital.

(iv) Dividend can be paid out of free reserves of the company.

Question 2.
Explain the legal provisions of the listed company regarding the declaration of dividends.
Answer:
When a company lists its shares on Stock Exchange, additional listing agreements are to be followed which are as follows:

Stock exchange should be informed. If the securities are listed 2 days prior to the Board meeting in which recommendation of final dividend is to be considered.
Stock Exchange should be informed immediately regarding the declaration of dividend as soon as the Board meeting gets over.
Notice of closing book should be informed at least 7 (seven) working days before the closure to the stock exchange.
Transfer Register and Register of Members should be closed.
Electronic Clearing Services (FCS) or National Electronic Fund Transfer (NEFT) mode should be used for the payment of dividends.
The listed company has to pay the dividend on a per-share basis only.