surrender of shares journal entries surrender of shares journal entries

Illustration : A Mills Ltd., decided to have internal reconstruction. For ESOP shares used to settle or fund liabilities for other employee benefits, employers should report satisfaction of the liabilities when the shares are committed to be released. His basis in those . When a company such as Big City Dwellers issues 5,000 shares of its $1 par value common stock at par for cash, that means the company will receive $5,000 (5,000 shares $1 per share). If the company credits Securities Premium Account only when the premium has been received, then the question of debiting Securities Premium Account on forfeiture will not arise. Taking into consideration that shares called upto 10 but 5 paid up..Now as if the rest amout has not been received thus following entry will be made:Equity share capital A/c(5)..DrTo,Equity share caiptal(3)To,Reconstruction, And after that:Equity share final call A/c..Dr 2To Equity share capital A/c 2 Bank A/c.Dr 2 To, Equity share final call 2, haha replying the answer after four years, INTERNAL RECONSTRUCTION AND SURRENDER OF SHARES. It is the commitment to release shares based on service in the current accounting period, not the employer's cash contribution or commitment to make a future contribution, which represents the economic transfer of compensation to participants in exchange for service. In this case the share holders volunteer to return some of the shares back to the company along with duly signed transfer deed. Capital Reduction A/c Dr. (70% of arrear preference dividend payable to preference Shareholders as per reconstruction scheme). Cancellation of Share Surrender not reissued. As with ordinary stock splits, no journal entry is required if the par value will change, although the description of common stock in the equity section should be updated. Entry on forfeiture will therefore be passed as if the shares had been issued at par and no premium had been received. Fixed Assets to be written down by `34,000. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. A notice has to be served on the defaulter requiring him to pay the unpaid amount together with interest accrued by a certain date. Privacy Policy 9. What is Surrender of Share : Surrender of share is an alternative to capital reduction. Shares that are repurchased and canceled by a company. Equity Share Capital A/c Dr. (Being the entry for reducing every share of `100 Each as `50 paid-up 7,500 equity shares @ `50 as Per the Board resolution dated .). The accounting entries Accounting Entries Accounting Entry is a summary of all the business transactions in the accounting books, including the debit & credit entry. Content: Forfeiture of Shares Provisions Impact Procedure Accounting Treatment Journal Entries Reissue of Forfeited Shares (b) As soon as the amount of the premium becomes due. The forfeiture of the shares results in: Discontinuation of shareholder's membership. Pass the journal entry. Forfeiture of 500 equity shares, on which amount @ Rs 5 per share has been received as application and allotment moneys for non-payment of the first call @ Rs 3 per share and the second and final call @ Rs 2 per share. Later, all the forfeited shares were reissued as fully paid up @ Rs 95 per share. Zed Ltd. issued 5,00,000 equity shares of Rs 10 each at a discount of 10% payable as to Rs 2.50 per share along with application, Rs 2.50 per share on allotment and the balance on the first and the final call to be made six months after allotment. (a) X Ltd. forfeits 100 12% preference shares of Rs. Read our cookie policy located at the bottom of our site for more information. Two months later, the remaining forfeited shares were reissued as fully paid up @ Rs 11 per share. Note: Equity Share capital A/c (W. Note 1) Dr. (Equity shareholders rights reduced to a share of `3.5 vide Board Resolution No. (c) The 11% preference shareholders rights are to be reduced to 50% and converted into 15% Debentures of Rs.10 each. A dividend should be recorded when it is declared and notice has been given to the shareholders, regardless of the date of record or date of settlement. Required: Prepare journal entries for issuing, buying back and retiring the shares assuming the company accounts for treasury stock related transactions using: cost . (iv) Balance Sheet after reduction. Prohibited Content 3. It is a short cut to the long procedure of forfeiture of shares. When a stock dividend in form is determined to be a split in substance, A stock dividend is recorded by transferring the fair value of the shares issued from retained earnings to the related equity accounts as discussed in. Employers should recognize compensation cost equal to the fair value of the shares for those ESOP shares committed to be released to compensate employees directly. Journal entry for forfeiture of shares is: If, we maintain Calls-in-Arrears Account we will credit Calls-in-Arrears Account instead of "Shares Allotment Amount" and "Shares Call Account". Thus, in this second method of passing entries on forfeiture of shares, the final effect is the same as in the first method. (a) Name a further day (not being earlier than the expiry of fourteen days from the date of the service of the notice) on or before which the payment required by the notice is to be made; and. All the applications were accepted. Capital Reduction A/c Dr. (Being payment of 5% penalty for cancellation of capital commitments of `3,00,000), (Of the above 90,000 shares have been issued for consideration, 2,000 6% Cumulative preference shares of `75 each fully paid, (2) Share Application Money pending allotment 0, Freehold Property (Including `2,00,000 appreciation in value due to reconstruction), Cash at Bank (`1,30,000 + `1,50,000 `22,500 `15,000), 2,00,000 Equity Shares of `10 each, `5 paid up, General Reserve Nil, Less: Debit balance of P&L a/c 4,08,000. Upon declaration of the stock dividend, FG Corp should record the following journal entry. 5. You will have to determine the number of shares you want to buy back in order to figure the total you will be paying out in cash in exchange for the shares. Further assume that the application and allotment moneys @ Rs 2,50 and @ Rs 2.50 per share respectively are received in respect of all the shares, but the first call and the second call @ Rs 3 and @ Rs 2 per share respectively are not received in respect of 500 shares which are therefore forfeited. This content is copyright protected. Issuance costs incurred in connection with stock dividends should be expensed as incurred. As a practical matter, the dividend amount is not determinable until the record date. The shares have a $1 par value per share. Investments are to reflect their market value of Share Capital A/c Dr. To Share Surrender A/c. (1) Each share shall be subdivided into ten fully paid equity shares of Rs 10 each. Account Disable 12. A dividend is a payment, either in cash, other assets (in kind), or stock, from a reporting entity to its shareholders. Here, we were not given the relevant details on the balance in additional paid-in capital, and, as a result, retained earnings were debited. It has 3 major types, i.e., Transaction Entry, Adjusting Entry, & Closing Entry. Book value of assets transferred is less than liability settled. Rs.30,000. Unlike with restricted stock, with RSUs no shares are issued to you at grantthey are not outstanding until they are released to you. *When shares are retired, the common stock and additional paid-in capital accounts are debited for the amounts recorded when the stock was originally issued. Reduction in the issued share capital of the company. Allotment money on 200 shares is not received. When shareholders have the option to elect cash or stock, the number of shares to be issued is a variable number. The value of assets is to be as follows: So, if you buy back 10,000 shares of stock at $15 per share, you will pay out $150,000 in cash. We use cookies to personalize content and to provide you with an improved user experience. On reissue of these shares, Discount on Issue of Shares Account is once again debited with the amount of the discount originally allowed on the shares reissued provided the amount received on reissue of these shares is less than the paid up value of these shares by at least the amount of such discount. Surrender of share is an alternative to capital reduction. The journal entries are: Illustration 1: Show the necessary accounts in all the methods. Issue of share out of Share Surrender in the name of creditor. The amount of shares surrendered not re-issued, and the claim foregone by debenture-holders and creditors are transferred to capital re-organisation account, which will be utilised to write off losses, fictitious account etc. How should FG Corp record the stock dividend? Deferred Advertising to be written off. If shares issued at a premium are forfeited, find out whether the premium on forfeited shares has been realised or not. Then, the Board of Directors reissued three-fourths of the forfeited shares as fully paid up @ Rs 9 per share. reaches zero, the remaining amount is debited to retained earnings. Also show how these transactions will be reflected in the companys balance sheet. Equity Share Capital Account Dr. 5,000. The amount is payable as 4 per share on the application, 5 per share (including premium) on the allotment, 3 per share . Accounting Treatment for Reissue of Forfeited Shares | Accounting, Accounting Provisions for Forfeiture of Shares | Company | Accounting, Issue of Shares at a Premium (With Illustrations), Issue of Shares: Problems and Solutions | India | Accounting. 7,00,000, Therefore, contribution per equity share =Rs. Solved Illustrations. Surrender is lawful only in two cases viz. The shares contributed or acquired with the cash contributed should be allocated to participant accounts as of the end of the employee stock ownership plan's fiscal year and held by the ESOP until distributed to the employees at a future date, such as on the date of termination or retirement. One shareholder holding 800 shares did not pay the first call. AccountingNotes.net. Fixed assets to be written down by Rs.1,50,000. Add : Depreciation (non-cash item) 83,000 Bank A/c Dr. (Sale proceeds), Bank A/c Dr. (Sale proceeds), To Asset A/c. Surrender of shares means the return of shares by the shareholder to the company for cancellation. Directors Loan A/c Dr. (Being Directors Loan discharged by issue of Share Capital and the balance transferred to Capital Reduction A/c). The Board of Directors of the company decided upon the following scheme of reconstruction: The preference shares are to be converted into 13% unsecured debentures of `100 each in regard to 80% of the dues (including arrears of dividend) and for the balance equity shares of `50 paid-up would be issued. Here, we were not given the relevant details on the balance in additional paid-in capital, and, as a result, retained earnings were debited. Accrued Debentures Interest A/c Dr. 6% Debentures A/c Dr. (Being claim of debenture holders settled in part in respect of principal amount by transfer of freehold property as per reconstruction scheme). The easiest way to deal with over-subscription shares is to reject some applications. Transfer of assets to creditors in discharge of liability. It is for your own use only - do not redistribute. To generate surplus for writing off accumulated losses & writing down over stated assets. Introduction to Forfeiture and Reissue of Shares 2. Cumulative Preference Shareholders A/c Dr. (Being the issue of 13% unsecured debentures and 1,464 equity shares of `100 each issued as `50 paid-up as per the Board resolution dated..). To retire shares under the cost method, two sets of journal entries are conducted: Accounting for the Repurchase of Shares: Record the entire amount of the purchase in the treasury stock account. Raman Ltd. as at 31st December, 2006 as follows: The fixed assets are heavily overvalued. If we reuse the same example as above, the journal entries would be as follows: The key difference between the constructive retirement method and the cost method is that the constructive retirement method does not involve the treasury stock account. The diversity of dividend statutes across jurisdictions makes it impracticable to state a general rule on the amounts available for dividends. Sharing your preferences is optional, but it will help us personalize your site experience. (8,964 `50 per share) 4,48,200 Copyright 10. Balance Sheet as at 31st March, 2013. Creditors would like to grant a discount of 5% if they are paid immediately. According to the SEBI guidelines, companies can do so if they find any incomplete applications. Balance on implementation of the scheme 5,10,700 Content Guidelines 2. Solution Forfeiture of Shares at a Premium Practical Problem 2 Share Capital - debited with total amounts called up; Unpaid Call A/c (Allotment, First Call etc) - credited with the portion of the amount called up but unpaid . Employers should charge dividends on allocated and committed to be released shares to retained earnings; dividends on unallocated shares should be treated as a payment of debt or accrued interest or as compensation cost, depending on whether the dividends are used for debt service or paid to participants. Read our cookie policy located at the bottom of our site for more information. The directors can accept the surrender of shares only when the Articles of Association authorise them to do so. Preference shares to be written down to `75 each and equity shares to Rs.2 each. This date is usually between the declaration date and payment date, A dividend paid in the form of promissory notes that may be negotiable, bear interest, and mature at different dates, and that is usually payable in cash, Pro rata distribution by a reporting entity of shares of a subsidiary without the surrender of the shares in the distributing reporting entity, Distribution by a reporting entity of shares of a subsidiary in exchange for a portion of the shares in the distributing reporting entity, Distribution by a reporting entity of shares of a subsidiary and new shares of its own stock in exchange for all of the old shares of the distributing reporting entity, Dividend payable in shares of the reporting entitys own stock, Issuance of additional shares of stock at a fixed ratio in relation to current shares to present shareholders. The debenture holders agreed to take over the freehold property at `1,30,000 and paid the balance to the company after satisfying their claim. If a common stock dividend is paid to holders of preferred stock when there is an accumulated deficit, the dividend should be accounted for at fair value with a corresponding increase in loss applicable to common shareholders. As on 1st April, 2013. Call on 300 shares was not received. A dividend in kind is paid by distributing property of the reporting entity, so is considered a nonmonetary transaction. The SEC staff has historically taken the view that in this circumstance, the reporting entity should capitalize only the stocks par value from additional paid-in capital. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. 8% Preference Share Capital A/c Dr. (30% of claim given up by preference shareholders as per reconstruction scheme dated.). In the Books of JINX Prospects Ltd. Such surrendered shares are usually utilised to reduce or extinguish debenture and trade liabilities. Hence, the following rectifying entry will be passed:. Poonam Co. Ltd. offered to public for subscription 1,00,000 14% preference shares of Rs 100 each at a premium of Rs 10 per share. As on 31st March, 2013 appears as below. Thank you for reading CFIs guide to Retired Shares. Account Disable 12. (a) where it is done as a short cut to forfeiture to avoid the formalities for a valid forfeiture and The shares are then allotted to debenture holders and creditors. Applications total 4,80,000 shares. Internal Reconstruction Recognisation with in the entity. Journal Entries on Forfeiture (or Surrender) and Reissue of Shares 3. If the amounts not received on the two calls have been transferred to Calls in Arrear Account, Equity Share First Call Account and Equity Share Second Call Account will stand closed and will be represented by Calls in Arrear Account. Of course if the reissue price exceeds the paid up value of reissued shares, Securities Premium Account will have to be credited with such an excess. Give the necessary journal entries. Please see www.pwc.com/structure for further details. If forfeited shares are reissued at a premium, the amount of such a premium will be credited to Securities Premium Account. Issue of share to applicants out of Surrender Share. Unutilized shares are cancelled. Now, this amount can be split in two parts; the amount which has been received and the amount which has not been received and because of which the shares have been forfeited. Capital commitments contracts totaling `3,00,000 are to be cancelled by payment of penalty @ 5% of Contract Value. : Cash receipt represents profit since there is no increase in liability. The following will be the entry on forfeiture of these shares if Calls in Arrear Account has not been opened:, To Equity Share Second Call Account 1,000. Equity Share Capital (`4) A/c Dr. (Being consolidation of 25,000 10% equity shares of `4 each into, To Equity Share Capital (New `10) each (See note), By 10% Cumulative Preference Share Capital (`10) A/c, To Freehold Property 1,30,000, Less : Debenture holders 84000, 8,000 10% Cumulative Preference Shares of `10 each, 10,500 Equity Shares of `10 each (of the above 10,500 equity shares, 500 equity shares were issued for consideration other than cash), Trade Payables 11,000, Creditors for Expenses 30,000, Leasehold Property 1,00,000, Scheme dated. Thus, share buy back results in decrease in share capital of the company. Copyright 10. Show the journal entries if such issues are made: (a) at par, (b) at a discount of 5% and (c) at a premium of 25%. It is for your own use only - do not redistribute. Consequently, the second call was made on 4,99,200 shares only which was duly received in full. The Balance Sheet of the Company as on 31st March, 2013 was as follows: A Mills Ltd. Stock dividends issued from a subsidiary to its parent normally result in a memorandum entry by the parent for the additional shares received. Subsequently, companies can choose to buy back shares from the market for numerous reasons, such as meeting stock option obligations, improving financial ratios, taking advantage of an undervalued share price, increasing ownership, and reducing dilution. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. If all the forfeited shares have not been reissued, Forfeited Shares Account will show a credit balance equal to gain on forfeiture of the shares not yet reissued. Follow along as we demonstrate how to use the site, Employers typically make cash contributions to employee stock ownership plans, either to fund debt service for a leveraged plan or to purchase shares that will be allocated to participants' accounts in the current fiscal period for a nonleveraged plan. Select a section below and enter your search term, or to search all click (1) No. ADVERTISEMENTS: Cash from Operations (A) 1,63,000 Surrender. Then, Forfeited Shares Account is debited and Share Allotment Account and various call accounts (or Calls in Arrear Account) are credited with the amount not received in respect of forfeited shares; it leaves a balance in Forfeited Shares Account which is equal to amount received in respect of forfeited shares. Transfer of Reconstruction surplus unutilized (if any) to capital reserve. . A reporting entity may address this by selling the fractional shares and distributing cash to shareholders, by issuing special certificates (called a scrip issue) for the fractional shares which are then bought and sold through an agent, by arranging for shareholders to buy or sell fractional shares without a scrip issue, or by issuing fractional share certificates. Change in Current Assets: Download Article. A scheme of re-organisation was prepared and passed. Investments A/c Dr. Capital Reduction (Balancing Figure) Dr. (Being the change in value of assets as per the resolution of the Board dated..). Securities Premium amount has not been received - the share capital amount is debited with the called-up amount. now eq.share will be reduced to rs 5 per share, rs 3 paid up. Consider removing one of your current favorites in order to to add a new one. Uploader Agreement. The salient points of the scheme are the following: (1) Each share shall be subdivided into ten fully paid equity shares of Rs 10 each. (b) 50% of the interest due on the debentures is waived. on the revised value of fixed assets, made a net profit of `80,000. As such, it should be recorded using the guidance in, If a reporting entity distributes shares of a consolidated entity or equity method investee as a dividend, it should be valued based on the recorded amount of the nonmonetary assets distributed based on the guidance in. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? But the loss on reissue of a share cannot be more than the gain on forfeiture of that share credited to Forfeited Shares Account at the time of forfeiture. Bad debts to the extent of 5% of the total debtors would be provided for. Sometimes, when a shareholder finds that he is unable to pay the calls made on him, he may voluntarily surrender shares to the company. Retiring shares reduces the number of authorized shares by the company. Record the abovementioned transactions in the Cash Book, the Journal and the Ledger. Stock is an ownership share in an entity, representing a claim against its assets and profits.The owner of stock is entitled to a proportionate share of any dividends declared by an entity's board of directors, as well as to any residual assets if the entity is liquidated or sold. Alternatively, the total called up amount in respect of forfeited shares is debited to Share Capital Account and credited to Forfeited Shares Account. (e) The banks agree to the arrangement and to increase the cash credit/overdraft limits by Rs.1,00,000 upon the shareholders agreeing to bring in a like amount by way of new equity. When shares have been issued at a discount: If shares which have been issued at a discount are forfeited shares and the discount in respect of forfeited shares has been debited to Discount on Issue of Shares Account, on forfeiture while passing the entry for forfeiture, the amount of such discount is credited to Discount on Issue of Shares Account. Peter owns 40% of the S corporation's 1,000 shares of outstanding common stock, or a total of 400 shares of the company's common stock, which he has owned for several years. Creditors A/c Dr. (Creditors claim discharged to the extent of 95% as per reconstruction scheme, the balance of the claim sacrificed, (Writing off debit balance of profit and loss account, patents & copy rights and writing down the value of debtors, investments and fixed assets as per reconstruction scheme). JOURNAL ENTRIES, JINX Prospectus Ltd. Solution: First Method: Note: In the case of policies on the lives of individual partners, the deceased partner has also a right to share the amount of surrender value, which the other partners' policies acquired at the time of death. The shares come with a $1 par value. It is rare that the fair value of the stock dividend would be less than the cash dividend; therefore, the cash dividend should be indicative of the minimum fair value of the shares issued. Equity Share Capital Account has received an unwanted credit while Equity Share First Call Account, Equity Share Second & Final Call Account and Capital Reserve have not received the due credit. Both the AICPA and the New York Stock Exchange (NYSE) have indicated that when an issuance of shares is so small in comparison with the shares previously outstanding that it has no apparent effect upon the share market price, there is a presumption that a stock dividend was declared. For solvent reporting entities, payment of dividends from retained earnings is almost always permissible. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. A stock split is the issuance of common shares to existing shareholders for the purpose of reducing the per share market price. After due notices have been served, these shares are forfeited. All moneys were duly received except the money on call on 100 shares which were forfeited after the requisite notices had been served. All rights reserved. Fill-in each stock transfer register post with data gathered from accounting journal entries and source documents, then update the ledger regularly with new share data. Debenture-holders agree to give up their claims to interest in consideration of their interest being enhanced to 12%. Surrender of Shares But no shares has to be surrendered in case of the company in consideration of the payment of money or money's worth by the company. There is no specific guidance on the accounting for a stock dividend when a reporting entity has an accumulated deficit rather than retained earnings. As on 31st March, 2013 is given below: The Court approved a scheme of reorganization to take effect on 1.4.2013 whereby: We use cookies to personalize content and to provide you with an improved user experience. Journal Entries: 1. Journal Entries on Forfeiture (or Surrender) and Reissue of Shares: When Shares have been Issued at Par: ADVERTISEMENTS: Book value of assets transferred is greater than liability settled. If the company contributed 1,000 shares of stock valued at $100, with a par value of $10, the appropriate journal entry would debit ESOP contribution expense for $100,000 and credit common stock for $10,000 and paid-in capital for $90,000. The scheme as sanctioned by the court was implemented. Fair value accounting is also appropriate for dividends declared on preferred stock that are payable in the form of additional preferred shares, when payment in additional preferred shares is at the discretion of the issuer. Preference Shareholders A/c Dr. (Amount due to preference shareholders discharged). Other nonreciprocal transfers of nonmonetary assets to owners shall be accounted for at fair value if the fair value of the nonmonetary asset distributed is objectively measurable and would be clearly realizable to the distributing entity in an outright sale at or near the time of the distribution. Forfeiture of Shares which were originally issued at Premium Are you still working? Arrears of Preference Dividend = 2 x 10% of Rs.1,00,000 =Rs.20,000 Plant and Machinery Rs.50,000 Content Guidelines 2. When a reverse stock split is effected without a change in the par value of the shares, the reporting entity should record an entry to reduce the common stock and increase additional paid-in capital. Assume that Company A repurchases 10,000 shares of its stock at $10 per share (total consideration is $100,000). Complete Stock Transfer Register. All equity holders agree to pay the balance in cash. (2) After such subdivision, each shareholder shall surrender to the Company 90% of his holding, for the purpose of re-issue to debenture holders and creditors so far as required, and otherwise for cancellation. How should FG Corp account for the stock split? A reporting entity may issue a dividend to its shareholders and give the shareholders the choice of receiving the dividend in either cash or shares (referred to as an optional dividend). Content Filtration 6. The authorized capital of the company permitted the issue of additional shares. Also, prepare the Balance Sheet as it would appear after all the above mentioned transactions have been recorded. (i) Journal entries for reduction of share capital and consolidation of preference shares and equity shares. Increase in creditors : Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. Investments are to reflect their market value. Figure FG 4-2. FG Corp effects a 2 for 1 stock split and changes the par value to $0.50 to reflect the split. Kay Ltd. with an authorized capital of Rs 30,00,000 offered to public 2,00,000 equity shares of Rs 10 each at a premium of Rs 1 each. From the journal entries above, the repurchased shares now sit in treasury and are considered treasury shares. This exercise is done to gain the confidence of different stake holders (creditors, lenders, customers, share holders etc) whose support is required for revival of the operations. FG Corp should not record an entry to record the stock split. read more depend on whether the shares were issued at Premium or . Cash to be brought in by Equity Shareholders: ` Balance Sheet of KING Co. Ltd. But such a surrender shall be acting beyond the legal rights of the company since it would amount to purchase by the company of its own shares. The tax basis of the stock is increased by the amount of the consent dividend, Distribution to shareholders without a formal dividend declaration by the board of directors, Preferred dividend that must be declared and paid for all periods, before any dividend may be declared and paid to common shareholders, A transaction that does not necessarily have the characteristics generally associated with a dividend, but nevertheless results in a transfer of value to the holder of an equity instrument that requires accounting similar to a dividend (e.g.,accretion to redemption value on redeemable convertible preferred stock), Cumulative preferred dividends for prior periods not declared or paid, Amounts paid to holders of unissued shares (e.g., unvested stock or options) in a stock compensation plan, Dividend paid by distributing property (including notes) of the reporting entity rather than cash, Term indicating that the quoted price of a share of stock excludes the value of a declared dividend; the term attaches from the record date, or a few days before the record date (to allow for the recording of transfers just prior to the record date), until the payment date, Dividend in addition to the usual periodic dividend, Distribution to shareholders in excess of earnings, representing a return of capital, Dividend declared from current year earnings despite an accumulated deficit from past operations, Preferred dividend to which the preferred shareholders lose their rights if the dividend is not declared in respect of the applicable period, Preferred dividend that never exceeds a specified rate regardless of the dividends paid to common shareholders, A dividend for which shareholders may choose to receive cash or shares, Pro rata distribution to shareholders of cash, other assets (including evidences of indebtedness), or shares of capital stock declared by the board of directors, Dividend paid in the form of additional shares of stock having a value equal to the specified dividend rate, Preferred dividend in excess of a stipulated minimum rate, shared with the common shareholders (the preferred shareholders participate in the earnings of the entity) usually after the dividends paid to the common shareholders reach a prescribed amount per share.