I am practising one of the past papers at university, and I face a problem about dividends.
The question is about producing statement of income or loss and financial position from trial balance. One of the additional information is:
"The financial year was 1/12016 - 31/12/2016. On 31 December 2016, the directors recommended that the preference share dividend and a proposed dividend of 2p per ordinary share are to be provided for."
How should I solve this additional information?
a) Ignore it
b) Debit retained earnings account & credit cash/bank account
c) Debit retained earnings account & credit dividends payable account (shown as current liabilities)