What is the presentation of dividend received on preferred shares?Group of answer choicesDeducted from Retained EarningsDeducted from share premiumOther income as part of Profit or lossFinance cost as component of other Comprehensive income
Question
What is the presentation of dividend received on preferred shares?Group of answer choicesDeducted from Retained EarningsDeducted from share premiumOther income as part of Profit or lossFinance cost as component of other Comprehensive income
Solution
The presentation of dividend received on preferred shares is typically shown as "Other income as part of Profit or Loss". Here's a step-by-step explanation:
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Dividends received on preferred shares are considered as income for the company that owns the shares.
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This income is not deducted from Retained Earnings or Share Premium, as these are components of the company's equity and not its income.
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It is also not considered a Finance Cost, as this term typically refers to the cost of debt, not the income from equity investments.
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Therefore, the dividend received is usually presented in the financial statements as part of "Other Income" in the Profit or Loss section. This is because it is an income that is not generated from the company's main business operations.
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