As per Rule 7 of the Companies (Declaration & Payment of Dividend) Rules, 2014, in the event of inadequacy or absence of profits in any year, a…

CA Intermediate · Advanced Accounting · PYQS · September 2025
As per Rule 7 of the Companies (Declaration & Payment of Dividend) Rules, 2014, in the event of inadequacy or absence of profits in any year, a Company may declare dividend out of surplus subject to the fulfilment of the condition that total amount to be drawn from such accumulated profits shall not exceed ______as appearing in the latest audited financial statement.
(A) (A) 1/10 th of the total assets
(B) (B) 1/5 th of the sum of its paid-up share capital
(C) (C) 1/10 th of the sum of its paid-up share capital and free reserves
(D) (D) 1/5 th of the sum of its paid-up share capital and free reserves

Suggested Answer and Working Notes:

Correct Answer: Option (C)

(C) 1/10 th of the sum of its paid-up share capital and free reserves

Topics: AS 10, Buyback of Securities

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