DIFFERENCE BETWEEN EQUITY AND PREFRENCE SHARE
EQUITY SHARES CAPITAL
MEANING
Equity share is also referred to as ordinary shares
and in Indian context it is defined by section 85
(2) of the companies act 1956. They are the real
risk-takers and care- takers of the company and
they enjoy the right of voting
DIVIDEND
Equity shares are shares whose profit sharing
depends on the PROFIT MAKING of the
Company.
If the company makes huge profits, there
dividend sharing will be high else it will be
low
PREFRENCE SHARES CAPITAL
MEANING
DIVIDEND
Preference Share Holders, Dividend is a fixed
income to them. They get dividend at a fixed rate,
irrespective of the Profit Making of the Company.
If company's does not pay dividend in particular
year the dividend is then added to the next year's
dividend If the company can't pay it the next year
as well, the dividend keeps getting added until the
company can pay These are known as cumulative
preference shares.
Some preference shares are non-cumulative -- if
the company can't pay the dividend for one
particular year, the dividend for that year lapses.
TRADING
Equity shares are traded in the markets and
their prices go up and down depending on
supply and demand for the stock.
You will have to sell your shares to any other
buyer in the stock market. You can only sell
your shares back to the company if the company
announces a buyback offer.
 
VOTING RIGHTS
Equity Shares has voting right and they are the real
owners of company
TRADING
Preference shares, of course, is the fact that they
aren't traded on the markets.
This means they are not 'liquid' assets; there's
little scope for the price of these shares to move
up or down. But, that does not mean the
investor is stuck with his shares. After a fixed
period, a preference shareholder can sell his/ her
preference shares back to the company.
VOTING RIGHTS
Preference share holders are not owners of the
company and do not enjoy any voting right
Revenue reserve Capital reserve
 An account containing
details of income available
for distribution to
shareholders. Related tags:
revenue reserve
 Reserve Capital- Part of the
authorized capital of a firm
which has not yet called up
and is available for drawing in
case of need.
Capital Reserve- Reserve
created by the accumulated
capital surplus( not the
revenue surplus) of the firm
e.g an upward revaluation of
assets by a firm to reflect its
assets at the current market
values after appreciation.
Difference between revenue reserve and capital reserve.
Revenue reserve
 Fund distributable to
shareholders as dividends.
eg. Profit and loss account,
general reserve.
• It can not arise during the
period prior to in corporation.
Capital reserve
fund set aside for the specific
purpose. Eg. unspecified
contingencies .ie.Inflation
It may arise during the period
prior to incorporation.

It is always specific.

• It can be general or specific.
rr cr
 It may be distributed as It is not distributed as profit.
profit.

 It is always an internal Transaction for capital

transaction. reserve may be internal or
external.