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JAMB Principles of Accounts 2013 Question 46

Question 46

Company Accounts

The distributable profit available to shareholders at the end of each year is the

  1. A.total profit and debtors balance.
  2. B.general reserve and retained profit.
  3. C.retained profit and fictitious assets.
  4. D.total profit less creditors balance.
Show the answer and explanation

Answer: B (general reserve and retained profit.)

Explanation

Dividends can be paid only out of revenue reserves, that is the general reserve and retained profit.