Preference shares and dividends
You'll learn how preference shares work and why their accounting treatment differs fundamentally depending on whether they're redeemable or irredeemable.
This lesson is part of a paid course
Buy the course to unlock every video lesson and the AI Tutor, plus mock exams with feedback on CIMA courses.
Already bought? Sign in
Ask the AI tutor anything about this lesson
It knows every lesson in the course — explanations, clarifications, practice questions.
In this lesson
- 0:00 Preference shares explained
- 0:47 Redeemable vs irredeemable preference shares
- 2:00 Accounting treatment by preference share type
- 3:03 Worked example: preference share dividend
- 5:01 Dividends and capital distribution
- 6:29 Redeemable preference share dividends as finance costs
- 7:03 Interim and final dividend types
- 7:46 Worked example: declared dividend recognition
About this lesson
This video covers the key characteristics of preference shares—fixed dividends, priority over ordinary shareholders, and limited voting rights—then explains the critical distinction: irredeemable preference shares are equity (dividends aren't expenses), while redeemable preference shares are debt (dividends are finance costs). You'll also explore how dividends are recorded in financial statements, the difference between interim and final dividends, and when dividend liabilities should be recognised. This is essential knowledge for Financial Reporting, Strategic Business Reporting, and related ACCA and CIMA papers, where preference share classification directly affects how you present financial statements and calculate key metrics.
Duration: 10m
Transcript
Every lesson comes with a full searchable transcript - included with the course.
Get the Financial Accounting course
All 105 video lessons, an AI Tutor in every lesson and lifetime access.
Already bought? Sign in