Distinguish Between Interim Dividend and Final Dividend | 12th HSC Secretarial Practice (S.P.) Chapter 10
The distinction between Interim Dividend and Final Dividend is a 5-star repeated board exam question from Maharashtra State Board (MSBSHSE) 12th Standard HSC Secretarial Practice (S.P.) Chapter 10: Dividend and Interest. Since Chapter 10 contains only two textbook exercise distinctions, at least one of them is almost guaranteed to appear in Question 4 (Distinguish Between) carrying 4 Marks. Below is the complete, textbook-accurate tabular solution strictly aligned with the latest Balbharati Textbook and official board marking scheme.
Board Exam Marking Scheme Tip: Each Distinguish Between question in Q.4 carries 4 Marks (1 mark per valid point). Always present your answer in a neat 3-column table including the Basis of Distinction. Write at least 5 to 6 clear points (starting with Meaning, Who Declares, When Declared, and Rate of Dividend) to guarantee a full 4 out of 4 score!
Distinguish Between: Interim Dividend and Final Dividend
| Sr. No. | Basis of Distinction | Interim Dividend | Final Dividend |
|---|---|---|---|
| 1. | Meaning | Interim Dividend is the dividend declared and paid by the Board of Directors between two Annual General Meetings (AGMs) before the finalization of annual accounts. | Final Dividend is the dividend declared and paid to shareholders after the close of the financial year at the Annual General Meeting (AGM). |
| 2. | Who Declares | It is decided and declared by the Board of Directors by passing a Board Resolution in the Board Meeting. | It is recommended by the Board of Directors and declared by the Shareholders by passing an Ordinary Resolution at the Annual General Meeting (AGM). |
| 3. | Authorization | It can be declared only if the Articles of Association (AoA) specifically authorize the Board of Directors to declare it. | It does not require any specific authorization in the Articles of Association. |
| 4. | When Declared | It is declared during the middle of the accounting year (before the preparation of the final annual accounts of the company). | It is declared only after the financial year ends and the final accounts (Balance Sheet and Profit & Loss Account) of the company are prepared and audited. |
| 5. | Rate of Dividend | The rate of interim dividend is generally lower than the rate of final dividend. | The rate of final dividend is always higher than the rate of interim dividend. |
| 6. | Source | It is declared out of the anticipated profits of the current accounting year or surplus in the Profit and Loss Account. | It is declared out of the current year's actual audited profits, free reserves, or capital profits (if realized in cash). |
| 7. | Accounting Aspect | It is declared before preparing the final annual accounts of the company. | It is declared only after preparing and finalizing the annual accounts of the company. |
Quick Memory Trick to Remember All Points in the Exam
Memory Shortcut (Mnemonic — "MW-AW-RSA"):
Remember these 6 easiest points from the Balbharati textbook to write in under 4 minutes:
1. Meaning (Declared Between Two AGMs vs. Declared at the AGM After Financial Year Ends)
2. Who Declares (Declared by Board of Directors vs. Recommended by Board & Declared by Shareholders at AGM)
3. Authorization (Articles of Association Must Authorize vs. No Authorization in Articles Required)
4. When Declared (During the Middle of Accounting Year vs. After Closing of Financial Year)
5. Rate of Dividend (Rate is Lower vs. Rate is Higher)
6. Source (Out of Anticipated Profits of Current Year vs. Out of Audited Current Profits & Free Reserves)
Key Concept Summary for Objective Questions (Q.1)
- Origin of Word "Dividend": The term Dividend is derived from the Latin word "Dividendum", which means "that which is to be divided".
- Separate Bank Account (5 Days): Both Interim Dividend and Final Dividend amounts must be deposited in a separate scheduled bank account within 5 days from the date of declaration.
- Payment Time Limit (30 Days): Dividend (whether Interim or Final) must be paid or dividend warrants posted to shareholders within 30 days from the date of declaration.
- Unpaid Dividend Account (7 Days): Any dividend that remains unpaid or unclaimed after 30 days must be transferred to the "Unpaid Dividend Account" within 7 days from the expiry of the 30-day period (i.e., within 37 days of declaration).
- IEPF Transfer (7 Years): Any money remaining unpaid in the Unpaid Dividend Account for a continuous period of 7 years must be transferred to the Investor Education and Protection Fund (IEPF).