Question

‘Accumulated dividend arrears’ on preference shares is shown in the company’s balance sheet as ______.

Options

• Current Liability

• Contingent Liability

• Commitments

• Short-term Provision

Answer 1

‘Accumulated dividend arrears’ on preference shares is shown in the company’s balance sheet as contingent liability.

Explanation:

Since dividends are payable only when declared by the Board of Directors, and until then, the company has no legal obligation to pay them, they are not shown as actual liabilities in the Balance Sheet, but are instead disclosed as: Contingent Liabilities in the Notes to Accounts