Proposed dividend: It may be taken as a current liability. In such a case it will appear as one of the items decreasing working capital in the schedule of changes in working capital. It will not be shown as an application of funds when dividend is paid later on.

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Proposed dividend may simply be taken as an appropriation of profit. In such a case proposed dividend for the current year will be added it to current year’s profit in order to find out the funds from operation if such amount of dividend has already been charged to profits. Proposed dividend will be shown as an application of funds.

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