Difference Between Final Dividend and Interim Dividend (7 Points) | Important Article
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Difference Between Final Dividend and Interim Dividend
Meaning of Final Dividend
It is that part of the profits of the company which is distributed amongst its shareholders. Dividend is ‘a share in distributable profits of the company to which the shareholder is entitled when it is formally declared b the company.’
Definition
The Institute of Chartered Accountants of India has defined Dividend as, “a distribution to shareholders out of profits or reserves available for this purpose.”
Meaning of Interim Dividend
Dividend declared b the Board of Directors between two Annual General Meetings is called Interim Dividend. Interim dividend is paid in the middle of the accounting year i.e. before the finalization of annual accounts for the year. Opinion of the company’s Auditors should be taken before declaring Interim Dividend.
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Difference Between Final Dividend and Interim Dividend
| Points | Final Dividend | Interim Dividend |
| 1) Meaning | It is declared and paid after the close of the financial year. | It is declared and paid between two AGMs of an accounting year. |
| 2) Who Declares | It is decided and recommended by the Board of Directors. It is declared by the shareholders in the AGM. | It is decided and declared by the Board of Directors in the Board Meeting. |
| 3) Authorization | It’s declaration does not need authorization by Articles of Association. | It can be declared only if Articles of Association permits its declaration. |
| 4) When Declared | It is declared at the Annual General Meeting of the company | It is declared between two Annual General Meetings of the company. |
| 5) Rate | Rate of final dividend is always higher than Interim Dividend. | Rate of Interim dividend is lower than final dividend. |
| 6) Source | It is declared from different sources like; current year’s profits, free reserves, capital profits, Mone provided by Govt. for dividend, etc. | It is declared out of profits of the current accounting year. |
| 7) Accounting Treatment / Aspect | It is declared only after the accounts of the year are prepared and finalized. | It is declared before preparation of the final accounts of the company |
