Unclaimed dividend is shown under the head of "Other Current Liabilities" in the company's balance sheet, typically labeled as "Unpaid Dividend" or "Unclaimed Dividend" account
. Here is a detailed explanation:
- When a company declares a dividend but the shareholder does not claim the payment, the dividend amount is held separately in a special "Unpaid Dividend Account" or "Unclaimed Dividend Account" instead of being recorded as an expense or paid out immediately
- This unclaimed dividend remains a liability for the company because it represents money owed to shareholders. Hence, it is classified as a current liability on the balance sheet under "Other Current Liabilities"
- The company must maintain this unclaimed dividend separately for seven years. During this period, shareholders can claim their dividends by providing necessary documentation
- After seven years, if the dividend remains unclaimed, the company transfers the amount to the Investor Education and Protection Fund (IEPF), relieving the company of liability, although shareholders can still claim the amount from the IEPF
In summary, unclaimed dividends appear as a current liability on the balance sheet under a specific head such as "Unpaid Dividend" or "Unclaimed Dividend" until they are either claimed by shareholders or transferred to the government fund after seven years.
