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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Which statement about preference share capital under the Companies Act, 2013 is correct?

Preference share capital carries a preferential right to payment of dividend at a fixed amount or rate and to repayment of paid-up capital on winding up. It stays preference capital even if it also has limited participation rights in profits or surplus.

  1. AIt carries a preferential right to dividend and to repayment of capital on winding upCorrect
  2. BIt must always carry unlimited voting rights
  3. CIt can never participate in surplus after capital is repaid
  4. DIt is the part of capital that is not equity share capital only in a Producer Company

Explanation

Section 43 defines preference capital as that carrying a preferential right to dividend (fixed amount or rate) and to repayment of paid-up capital on winding up. It remains preference capital even if it also participates in dividends or surplus, so the other options are wrong.

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