UNIT-5 DIVISIBLE PROFITS&DIVIDENDS INVESTIGATION AUDIT OF COMPUTERIZED ACCOUNTING

INVESTIGATION An Investigation may be defined as a close examination of accounts and records and a search for the relevant data, with a view to ascertaining any fact for some special purpose...

CLASSIFICATION OF INVESTGATION Evaluations. Reviews Surveys Analyses Special Audits Statutory Investigation

MODE OF INVESTIGATION General particulars of Business No. of. Plants and their Location No. of. Sales centers and their location. List of share holders. Names of directors and other executives. Credit Repots Area of Business Manufacturing position Organization structure Financial position Tax liability Assets Investments Liabilities

STATUTORY INVESTIGATION An Statutory Investigation into the affairs of the company means an Investigation of all its business affairs Secs.235-251 of the Companies act deals with the Investigation of the affairs of the company to be made by the Central government;

WHEN IT IS MADE On Report by The Registrar(Sec.235(1)) On application by the members of the company[Secs.235(2)(a)(b) and 236] Investigation in other cases[Sec.237] Where Investigation is Mandatory[Sec 237(a)] Where investigation is discretionary[Sec.237(b)]

INSPECTOR AND HIS POWERS Only an Individual can be appointed as inspector to conduct an Investigation.-Ashoka Marketing Ltd.vs.Union of India. To investigate affairs of any other company in same group. To require officers of the company to produce books, etc., and to assist. To require any body corporate to give information. To keep books papers in custody. To examine officers on oath. To seize books and papers

INSPECTOR REPORT AND IMPORTANCE OF REPORT The Inspector may and, if so directed by the central government must, make interim report to the government. Manner of disposal of report by the central government [Sec.241(2)] Prosecution[Sec.242] Application to the court for winding up of company[Sec.243] Expenses of Investigation[Sec.245] Investigation of ownership of company[sec.247]

DIVISIBLE PROFITS All the profits of the company are not divisible profits. Only those profits which can be legally made available to share holders by the way of dividend. It is to be noted that divisible profits do not include “profit on revaluation” of fixed assets and other profits of “capital nature” Sec 205 of the companies act 1956 lays down the rules for computing divisible profits.

DETERMINANTS OF DIVISIBLE PROFITS Memorandum & Articles of Association The Companies act,1956. Legal Decisions. Principles of accountancy. Regulations for management of companies limited by shares contained in the Table “A” of schedule1 make some provisions in the various clauses i.e. Clause 85-92 of Table “A”

DIVIDEND It refers to that amount of divisible profits which is distributed among the share holders of the company. A member (share holder) is entitled to receive dividend when it is declared by the board of directors as per the provisions of the Article.

TYPES OF DIVIDENDS Preference Dividend Unclaimed Dividend Proposed Dividend Final Dividend Interim Dividend Corporate Dividend Tax

LEGAL PROVISIONS RELATING TO DIVIDENDS Sources of dividends.[Sec.205] Dividends not to be paid out of capital Payment of dividend in proportion of amount paid up on shares Dividends in cash only. Transfer to dividend bank and unclaimed dividend account

FACTORS DETERMINIG THE PAYMENT OF DIVIDEND Nature of earnings Liquidity. Future plans Capital Structure Share value Tax Implications