Difference Between Proposed Dividend and Dividend Payable (With Table)

A Dividend is basically stated as earnings from the profits of a company that isn’t kept paid by the company’s owner, which depends on the company’s self-owned equity instead of their contribution. A Dividend is a pay, initially decided at the end of a financial year, which is later approved by the board of directors.

Proposed Dividend vs Dividend Payable

The difference between a proposed dividend and a dividend payable is that a proposed dividend is decided by the management of the company for the share, which is to be paid by the shareholders of the company. On the other hand, A Dividend payable is the dividend paid to the shareholders, finalized in annual general meetings.

A proposed dividend is a dividend that is to get distributed to the shareholders of the company, which is due in a financial year for a specific year. A proposed dividend is stated to have importance and an essential feature for financing temporary working capital for taxation of a company.

Dividend payable is the money or share from the profits earned from the company, which is stated and kept as the dividend by the board of directors of a company. When such a decision is taken, it is mandatory to pay the decided amount to the shareholders of the company.

Comparison Table Between Proposed Dividend and Dividend Payable

Parameters of comparisonProposed DividendDividend Payable
Announcement of the dividendMade by the management of the companyMade by the board of directors of the company.
Interest rateThe interest rate is low.The interest rate is high as compared to the proposed dividend.
Announcemt timeAfter the financial statements have been preparedUntil the financial statements are prepared.
WIithdrawalThis dividend cannot be withdrawn.This can be withdrawn by agreement between the members.
Article of associationIt is not mentioned in the article of association.It is mentioned in the article of association.

What is Proposed Dividend?

The proposed dividend is said to be under contingent liability in the balance sheet. A proposed dividend is basically an essential way to finance temporary workings capital for taxation. This dividend also acts as finance that helps fill the gap between the dividends that it proposes and the distributed dividend. The proposed dividend is essential for financing to cost through a dividend that is offered, which doesn’t involve any kind of cost.

Utilizing such a kind of dividend does not usually require any type of legalities for a company. This kind of proposed dividend does not even involve any sort of issue-related cost too. The main advantage of a proposed dividend for a company is that it is a very cheap source to finance provisions like taxation for a person’s company. This kind of dividend also doesn’t include or require any obligation to pay interest on the part of the company.

The disadvantage of the proposed dividend is that this kind of dividend is suitable only for a short period of finance. The amount of finance that is allowed or bought through this kind of dividend is usually less in value than other dividends to be stated in a company.

What is Dividend Payable?

Dividend playable is said to be under current liabilities in the balance sheet of a company. Dividend payable is the dividend that is approved by the company’s shareholders in the annual general meetings. This dividend has to be paid by the company within specific due dates. The calculation of these shares varies from a different class of shares, depending on their preference. The divide payable should be paid to the bank partners who are authorized under the obligation on the company.

Dividend playable is said to be under current liabilities in the balance sheet of a company. Dividend payable is the dividend that is approved by the company’s shareholders in the annual general meetings. This dividend has to be paid by the company within specific due dates. The calculation of these shares varies from a different class of shares, depending on their preference.

This kind of Dividend is considered as a liability of an odd type. This is because this dividend has an obligation to pay its own shareholders while other company liabilities are done to separate outside parties such as lenders. Dividend payable must be considered as a valid liability of a company. This dividend makes it possible to have high liquidity of profit for the company since it implies that it has a good year.

Main Differences Between Proposed Dividend and Dividend Payable

  1. The announcement of the Proposed dividend is made by the management of the company, and on the other hand, dividend payable is decided by the board of directors of the company.
  2. The rate of dividend is less in the proposed dividend, whereas it’s comparatively higher in the case of dividend payable.
  3. The proposed dividend isn’t mentioned in the article of association, whereas the dividend payable is mentioned in the article of association.
  4. A proposed dividend cannot be withdrawn when needs, but a Dividend payable can be withdrawn with an agreement between the owners.
  5. The proposed dividend is announced after the financial statements have been prepared, whereas the dividend payable is declared until the financial statements are prepared.

Conclusion

In short, the dividend is the appropriation of interests helping to recover the amount paid by the company owners. The proposed dividend is started to cover a portion of the year, while the dividend payable is usually for more than a year. A dividend that is recommended is to be declared and paid monthly after the income of the company has been made public for the shareholders to invest in that participate financial year. In contrast, a conditional dividend is supposed to be paid out of the earnings of the previous years. Dividends play a significant role in the progress of a company and its members.

References

  1. https://pdfs.semanticscholar.org/ff98/ac88d0910c1822b2dd284ab7c8da4a384d15.pdf
  2. https://journal.unnes.ac.id/sju/index.php/maj/article/view/23030