ACCOUNTING: Difference between preference shares and equity shares.

1. Distinction between Equity Shares and Preference Shares
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Distinction between Equity Shares and Preference Shares
The main differences between equity shares and preference shares are as follows:
1. Rate Of Dividend
The rate of dividend on equity shares may vary from year to year depending upon the availability
of profit. Preference share holders are paid dividend at a fixed rate.
2. Arrears of Dividend
Equity shareholders cannot get the arrears of past dividend. Cumulative preference share
holders can get the arrears of past dividend.
3. Redemption
Equity shares cannot be redeemed except, under a scheme involving reduction of capital.
Preference shares can be redeemed as provided by the articles and terms of issue.
 Payment
 Stock Market
 Interest Rates
 Market Stock
4. Voting
Equity shareholders enjoy voting rights. Preference shareholders do not have the right
to participate in the management of the company.
5. Payment of Dividend
Payment of dividend to equity share is made only after paying to preference shares. Preference
shares have a preferential right to receive dividend before equity shares.