Preferred Stock Meaning | Accounting Share

Accounting glossary · Understand, connect, apply

Preferred stock is a class of shares with specified rights that may give holders priority over common shareholders for dividends or liquidation distributions.

Example

Preferred shares may provide a fixed dividend preference before any dividend is paid on common shares.

Remember the difference

Rights depend on the share terms. Some redeemable or mandatory-payment instruments may be classified as liabilities under the applicable framework.

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Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.

Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.

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