Ordinary Dividends
From bib. source
This is the amount recommended by the directors, subject to approval by shareholders, to be distributed to ordinary shareholders. The ordinary shareholders are the owners of the business. The ordinary dividend varies with the fortunes of the business. It is dependent both on the level of earnings and the amount of cash available. Most dividends are paid out in cash.
The ordinary dividends are the dividends paid out to the ordinary shareholders, i.e. full or partial owners, of the company. The amount paid varies with the fortunes of the business–specifically, varies with the earnings or available cash (most dividends being paid in cash) (Kind 1999, 35).
It is key to understand that ordinary dividends “are appropriations of and not a charge against earnings¨ in the profit and loss account (Ibid). That is, they can be regarded as a mere distribution of cashed earnings to those with an ownership stake in the company, or as a consumption of those cashed earnings by a part of the living company, firm or business itself, such that it is not experienced as a loss in earnings or profit for that company, firm or business.
That being said, if an ordinary dividend–as agreed to in its amount by directors and approved by shareholders–is not paid, it becomes a current liability in the balance sheet categorized as a proposed dividend (Ibid). Once it is finally paid, nothing happens with the profit and loss account for reasons aforementioned, but the company’s cash will be reduced and the proposed dividend will be removed from the balance sheet (Ibid).
ordinary_dividends ordinary_dividend ordinary_shareholder ordinary_shareholders profit_and_loss_account profit_and_loss_statement owner stakeholder partial_ownership dividend appropriation appropriations proposed_dividend proposed_dividends current_liability finance accounting balance_sheet cash_flow_statement cash_flow
bibliography
- “The Profit and Loss Account in More Detail.” In Accounting and Finance for Managers, 25–37. The Fast Track MBA Series. Dover, NH: PriceWaterhouseCoopers, 1999.