Paper 2 · November 2010 · limited company final accounts

Cumulative preference shares are preference shares on which:

Athe dividend varies with the profit earned

Bany unpaid dividend is carried forward as arrears

Cthe holder has a vote at the annual meeting

Dthe dividend is paid after the ordinary dividend

Explanation

The fixed dividend on a cumulative preference share is not lost in a year when profits are too small to pay it. It becomes arrears and must be paid out of later profits before any ordinary dividend can be paid.

Derived from ZIMSEC Accounting 9197/2 Paper 2, November 2010, Q1

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