An item that would be considered a first charge against profit in a company’s account is?

A. ordinary dividend
B. preference dividend
C. capital reserve
D. general reserve

Correct Answer:

Option B – preference dividend

Explanation

Preference dividend is a dividend that is allocated to and paid on a company’s shares. If a company is unable to pay all dividends, claims to preferred dividends take precedence over claims to dividends that are paid on common basis.