[Debit]. Bonds = 100,000[Credit]. Gain on Appreciation of Bonds = 100,000[$600,000 - $500,000][Debit]. Retained Earnings [Property Dividend Declared] = $600,00[Credit].

Property Dividends Payable = $600,000 2. Date of Distribution [Debit]. Property Dividends Payable = 600,000[Credit]. Investmentsin Lie Dharma Company Bonds = 600,000 Stock dividend : G i v e n i n t h e f o r m o f b o n u s s h a r e s o r s t o c k s o f t h e i s s u i n g company or a subsidiary company. Normally, they are offered on thebasis of a prorata allotment (1)Regular Dividend. By dividend we mean regular dividend paid annually, proposed by theb o a r d o f d i r e c t o r s a n d a p p r o v e d b y t h e s h a r e h o l d e r s i n g e n e r a l meeting. It is also known as final dividend because it is usually paid a f t e r t h e f i n a l i z a t i o n o f a c c o u n t s . I t s i s generally paid in cash as a p e r c e n t a g e o f p a i d u p c a p i t a l , s a y 1 0 % or 15 % of the capital.Sometimes, it is paid per share. No d i v i d e n d i s p a i d o n c a l l s i n advance or calls in arrears. The company is, however, authorised tomake provisions in the Articles prohibiting the payment of dividend onshares having calls in arrears. (2) Interim Dividend . If Articles so permit, the directors may decide to pay dividend at anytime between the two Annual General Meeting before finalizing the accounts. It is generally declared and paid when company has earnedheavy profits or abnormal profits during the year and directors whicht o p a y t h e p r o f i t s t o s h a r e h o l d e r s . S u c h p a y m e n t of dividend in between the two Annual General meetings before finalizing t h e accounts is called Interim Dividend. No Interim Dividend can bed e c l a r e d o r p a i d u n l e s s d e p r e c i a t i o n f o r t h e f u l l y e a r ( n o t proportionately) has been provided for. It is, thus,, an extra dividendp a i d d u r i n g t h e y e a r r e q u i r i n g n o n e e d o f a p p r o v a l o f t h e A n n u a l General Meeting. It is paid in cash. (3) Stock-Dividend: Companies, not having good cash position, generally pay dividend int h e f o r m o f s h a r e s b y c a p i t a l i z i n g t h e p r o f i t s o f c u r r e n t ye a r a n d o f past years. Such shares are issued instead of paying dividend in cashand called 'Bonus Shares'. Basically there is no change in the equityof shareholders. Certain guidelines have been used by the companyLaw Board in respect of Bonus Shares. (4) Scrip Dividend .

S c r i p d i v i d e n d s a r e u s e d w h e n e a r n i n g s justify a dividend, but the cash position of the company is temporarilyweak. So, shareholders are issued shares and debentures of other c o m p a n i e s . S u c h p a y m e n t o f d i v i d e n d i s c a l l e d S c r i p D i v i d e n d . Shareholders generally do not like such dividend because the sharesor debentures, so paid are worthless for the shareholders as directorsw o u l d u s e o n l y s u c h investment is which were not . Such dividend w a s a l l o w e d b e f o r e p a s s i n g o f t h e C o m p a n i e s ( A m e n d m e n t ) A c t 1960, but thereafter this unhealthy practice was stopped. (5) Bond Dividends . In rare instances, dividends are paid in the f o r m o f d e b e n t u r e s o r b o u n d s o r notes for a long-term period. Thee f f e c t o f s u c h d i v i d e n d i s t h e s a m e a s t h a t o f p a y i n g d i v i d e n d i n scrips. The shareholders become the secured creditors is the bondshas a lien on assets. (6) Property Dividend. Sometimes, dividend is paid in the form o f a s s e t i n s t e a d o f p a y m e n t o f dividend in cash. The distribution of

dividend is made whenever the asset is no longer required in t h e business such as investment or stock of finished good sods. But, it is,h o w e v e r , i m p o r t a n t t o n o t e t h a t i n I n d i a , d i s t r i b u t i o n o f d i v i d e n d i s permissible in the form of cash or bonus shares only. Distribution of dividend in any other form is not allowed. Factors affecting divided decision or determinantsof divided decision The financial management has to take a decision regarding thedistribution of dividend. These are two possible ways of dealing withthe distribution of profit. The profit should either be retained in thebusiness or distributed to the shareholders. Retained profit plays animportant role in the future growth and expansion of the enterprise,because these are internal sources of financing and do not involvefloatation costs and legal formalities. As such the company will adoptthe policy of residual or passive (lesser) distribution, so far it canprofitably invest its retained earning as a source of internalfinancing. The term residual distribution here means the declarationof dividend out of the profit remaining left after internal financing of thecompany.The dividend may be declared as higher rates if the intention of thecompany is to increase the value of shares. The dividend decision isalso affected by the preference of shareholders. Let us now discussthe factors determining divided decisions: (1)Financial requirement of the company: -

If the company hasprofitable investment opportunities in the enterprise itself it will declaredivided at lower rates. Meeting long-term financial requirement out of its own resources is always in the interest of the company, because itis cheaper due to absence of floatation costs and legal formalities.Higher divided will declared by the companies having few longterminvestment opportunities. (2)Availability of funds: The liquidity of a company or availability of cash resources is prime consideration in divided decision. The greater the liquidity of a company, the greater is its ability to pay dividend. The liquidity of the company is strongly influenced by the firms investmentand financing decisions. The investment decision determines the rateof asset expansion and the firms need for funds and the financingdecision determines the way in which this need will be financed. (3)Stability of dividends: It is always in the interest of the company,investors and shareholders to follow the policy of stable dividend,because it resolves the uncertainty in the mind of investors andsatisfies their for current income. Financial institution also likecompanies, declaring dividend regularly at stable rates. No companywould like to ignore investment by financial institutions. In thesecircumstances the company may adopt one of the three followingpolicies:a. Constant dividend per share or constant dividendrate: - According to this policy dividend is declared atconstant rate every year. The rate ma