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Question: " Holding gains in relation to stocks should not be used for payment of dividend." Which on of the following accounting principle is involved in this?
a) Consistency
b) Cost
c) Materiality
d) Realization

Answer: (d)
Description: " Dividends can only be paid out of the profits which have been realized in cash." The realization concept states that any change in value of an asset is to be recorded only when the business realizes it. The change is not o be counted unless there is certainty that such change will materialize. Therefore, holding gains in relation to stocks should not be used for payment of dividends because these have not been realized in cash.



Category Fundamentals of Accounting Interview Questions & Answers - Exam Mode / Learning Mode
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Question: " Holding gains in relation to stocks should not be used for payment of dividend." Which on of the following accounting principle is involved in this?
a) Consistency
b) Cost
c) Materiality
d) Realization

Answer:

(d)
Description: " Dividends can only be paid out of the profits which have been realized in cash." The realization concept states that any change in value of an asset is to be recorded only when the business realizes it. The change is not o be counted unless there is certainty that such change will materialize. Therefore, holding gains in relation to stocks should not be used for payment of dividends because these have not been realized in cash. Source: CoolInterview.com



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