## Final Dividend Treatment under AS 13
### The Core Distinction
When you receive a dividend, the key question is: was the dividend declared for profits earned before or after you acquired the shares?
| Dividend on | Treatment | Reasoning |
|---|---|---|
| Opening shares (held from last year-end) | Income — credit P&L | Earned post-acquisition |
| CY Purchases (bought during the year) | Recovery of Cost — credit Investment A/c | Pre-acquisition profit embedded in purchase price |
| Bonus shares | Income (default) | Unless question says otherwise |
| Right shares | Income (default) | Unless question says otherwise |
### Why CY Purchases = Recovery of Cost?
When you buy shares mid-year at a cum-dividend price, part of what you paid is effectively for the upcoming dividend. That dividend is not genuine income — it is a return of overpaid cost. AS 13 requires deducting it from the investment's carrying amount.
### Journal Entries
Dividend on Opening Shares (Income):
```
Bank/CIB A/c Dr ₹50,000
To Dividend Income (P&L) ₹50,000
```
Dividend on CY Purchases (Recovery of Cost):
```
Bank/CIB A/c Dr ₹10,000
To Investment A/c ₹10,000
```
This reduces WAM of remaining shares.
### Investment Ledger
In the three-column ledger (No. of Shares | Div | Amount):
- Dividend income entries appear in the Div column
- Recovery of cost entries appear in the Amount column (credit side)
### Default Rule for Bonus & Right Shares
- Question silent → dividend IS received → Income
- Question explicitly states 'no dividend' → do not record