Dividends in arrears on cumulative preferred shares constitute a liability to the corporation that should be recorded (accrued).

Question

Quizplus · Accepted Answer

Dividends in arrears on cumulative preferred shares are not considered a liability until a formal declaration of the dividend is made by the corporation's board of directors. Until then, they are generally disclosed in the notes to the financial statements rather than recorded as a liability.

Dividends in Arrears on Cumulative Preferred Shares Constitute a Liability