Companies and Cash flow summaries

Companies and Cash Flows

Dividends
● Portion of profit after tax distributed to shareholders (declared)
● “Ordinary share Dividends” / “Dividends on ordinary shares”
○ Declare, therefore create expense
■ Close off to appropriation at year end (total div) -> interim and final
● Pay immediately (interim)
○ Retained income note
○ CR: bank
● Owed and paid at later date (final/ recommended)
○ Retained income note
○ Trade and other payables notes
○ CR: shareholders for dividends (liability)
● Dividends are ALWAYS calculated on no. of shares in issue


Example
Financial Year 1 Mar 2021 -> 28 Feb 2022

Bal 1 Mar 2022:
OSC R6000 000 (3000 000 shares)
RI R420 000
Sh. for Div R20 000
SARS: inc tax R40 000CR

Transactions during the year
2021 Apr 1 Paid amts owing to SARS and the shareholders for dividends for the previous year

May 30 Issued 500 000 shares at R2.50 ea.

Jul 31 Declared and paid interim div. of 20c per share.
Made provisional tax payment to SARS, R100 000.

Nov 30 Repurchased 100000 sh at R2,50 each (EFT)

Jan 30 Made 2nd provisional payment to SARS, R800 000.

Feb 28 Declare final dividends at 30c per share (only shares in issue are eligible for
dividends)
Tax is calculated at 28% of profit R700 000

, Dividend calculation:
Current Year:
- Interim = R 700 000 pd and declared
- Final = R 1020 000 declared and owed
- TOTAL = 1720 000


Tax
● % of net profit before tax
○ NP before tax = 100%
○ NP after tax = 100% - tax %
■ Eg. if tax is 30%, NPAT = 70 %
● Payable to SARS
● Income tax
○ Expense
● SARS: income tax (L)
○ Portion of profit payable to SARS
○ Pd in 2 provisional payments to sars during the year
○ What is left owing to SARS would be paid in the following year




General Ledger

Balance sheet

Shareholders for dividends (L)

2021 Apr 1 Bank CPJ 20 000 2021 Balance b/d 20 000
Mar 1

Feb Dividends for GJ 1020 000
28 Ordinary shares

(final div still owed)