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- When the dividend is declared from pre-acquisition profits, and later on received by purchaser of investment, then such amount of dividend is deducted from the cost of investment. Dividend received out of pre-acquisition profits is referred as pre-acquisition dividend.
- Post – Acquisition Dividend if received should be credited to Profit & Loss Account. Dividend received out of post-acquisition profits is referred as post-acquisition dividend.
- Pre-acquisition dividend is recovery of cost whereas post-acquisition dividend is treated as income