When preference shares are cumulative, preference dividends not declared in a period are

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When preference shares are cumulative and preference dividends are not declared in a period, they are known as dividends in arrears. This means that the dividends are owed to the shareholders, and will need to be paid before any dividends can be paid to common shareholders. Therefore, dividends in arrears are considered a liability on the company's balance sheet.

When Preference Shares Are Cumulative, Preference Dividends Not Declared in a Period