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CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital

Which feature best identifies a share as preference share capital under the Companies Act, 2013?

Preference share capital is that part of issued capital carrying a preferential right to dividend, either a fixed amount or at a fixed rate, and a preferential right to repayment of paid-up capital on winding up or repayment of capital. Voting power or premium does not define it.

  1. AIt carries a preferential right to dividend at a fixed amount or rate and to repayment of capital on winding upCorrect
  2. BIt carries more votes per share than equity shares
  3. CIt can never be redeemed
  4. DIt is issued only at a premium

Explanation

Preference share capital is the part of issued capital carrying a preferential right to payment of dividend (fixed amount or rate) and to repayment of paid-up capital on winding up or repayment of capital. Votes, redemption and premium are not the defining tests.

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