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Accounting for Share Capital — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting for Share Capital4 Marks
Question
Write three points of differences between an equity share and a preference share.
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Answer

Difference between Preference Shares and Equity Shares:
Basis Prefrence share Equity share
Right to Dividend Divident is paid on preference share before it is paid on equity share. Divident is paid on equity share after it is paid on preference share.
Rate of dividend Rate of divident may be fixed. Rate of divident is proposed by the board of directors every year.
Arreares of Dividend If preference share are cumulated preference shares arrears of dividend is paid before dividend is paid on equity share. Dividend is declared every year in case dividend is not declared during the year it is not accumulated to be paid on comming years.
Convertibility preference share may be converted to equity shares if the term of issue so provided. Equity share are not convertible.

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