When Preferred Shares Are Cumulative and the Board of Directors

question 41

True/False

When preferred shares are cumulative and the board of directors passes on a dividend, the amount in arrears must be shown as a liability on the statement of financial position and a reduction from retained earnings on the statement of shareholders' equity and the statement of financial position.

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Definitions:

Fundamental Principle

A basic concept or underlying rule that is foundational to a system, theory, or scientific discipline, guiding thinking and action.

Favourable Consequences

Positive outcomes or rewards that are likely to encourage a particular behavior to be repeated.

Primary Reinforcer

A stimulus that satisfies a basic survival need and thus inherently reinforces and increases the likelihood of a behavior associated with it.

Secondary Reinforcer

A stimulus that becomes reinforcing through its association with a primary reinforcer, not inherently rewarding but has learned value.