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Elective Advance Auditing

Advance AuditingTU Board 2081

What is unclaimed dividend? Point out its accounting treatment.

2

Answer

· Based on the official syllabus and past papers
Updated
Dividend Account (Unclaimed Dividend)Dr.Cr.To Unclaimed Dividend A/c50,000To Shareholders' Equity (Retained Earnings)10,000By Dividend Declared60,000
Accounting treatment: ₹50,000 unclaimed (₹10,000 claimed) transferred to Unclaimed Dividend A/c and ₹10,000 retained in Shareholders' Equity

Unclaimed dividend refers to dividends declared by a company but not claimed or paid to shareholders within the stipulated time (usually 7–14 years in Nepal). These dividends become a liability until claimed.

Accounting Treatment

  1. At Declaration:
    • Debit Dividend Account (₹60,000).
    • Credit Retained Earnings (₹60,000).
Unclaimed Dividend Reserve AccountDr.Cr.By Unclaimed Dividend A/c50,000To Profit & Loss Appropriation A/c50,00050,00050,000
Final transfer of unclaimed dividends to reserve after statutory period
Dividend Declared₹60,000 creditedto Dividend Account (DClaimed Dividend Paid₹10,000transferred to SharehoUnclaimed Dividend₹50,000transferred to UnclaimAfter Statutory Period₹50,000transferred to Unclaim
Timeline of unclaimed dividend accounting treatment (Nepalese Companies Act)

  1. When Unclaimed:

    • Transfer unclaimed portion (₹50,000) to Unclaimed Dividend Account (liability).
    • Debit Dividend Account (₹50,000).
    • Credit Unclaimed Dividend Account (₹50,000).

  2. When Claimed Later:

    • Debit Unclaimed Dividend Account (₹10,000).
    • Credit Cash/Bank Account (₹10,000).

The unclaimed dividend remains a liability until paid. After the statutory period, it may be transferred to General Reserve (per Nepal Accounting Standard 32).

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