Examine the validity of the following: (a) XYZ Ltd wants to declare the dividend out of the current year profit without adjusting the previous year's carry forwarded losses and depreciation.

Section 123(1) of the Companies Act, 2013 provides that the dividend shall be declared or paid by a company for any financial year out of the profits of the company for that year arrived at after providing for depreciation or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation and remaining undistributed, or out of both. Proviso to this section provides that a company shall not declare dividend unless carried over previous losses and deprecation not provided in previous year or years are set off against profits of the company for the current year. Therefore, XYZ Ltd has to set off the previous year's carry forward loss and deprecation from current year profit before declaration of dividend.