Cashflows - Dividend

zippy

Hello

I wonder if someone can help.

I was doing a practice paper for DFS (December 2006) and I completed the cashflow reconciliation and the actual cashflow itself.

I was happy with my answer but in the suggested answers the dividend was not deducted from the reconciliation of net profit to cash from operating activities.

This confused me, I thought it was always deducted along with tax and interest paid.

Have the standards changed since 2006, so should I keep deducting it, or was there another reason? The only thing different about it to normal was that it wasn't shown in the accounts apart from as a note.

Can someone clarify the corrcet treatment for me? Good luck to everyone with their exams by the way!

peugeot

Dividends are no longer taken into account when calculating profit - they are taken to equity instead (i.e. they are not shown on the face of the profit and loss account/income statement).

In the cash flow statement you include dividends paid under 'Financing Activities'.

Kind regards
Steve

zippy

Aha, I think I just got myself confused! It makes sense now as they are deducted from retained earnings.

Thanks very much for your quick reply.