SHARE CATEGORIES – Equity or Liability?

When buying equity shares in a company, one can purchase different category shares, namely ‘ordinary shares’ (also referred to as ‘common stock’) and ‘preference shares’ (also referred to as ‘preferred stock’). Shares represent equity in a company. However, in certain circumstances shares may have to be recognised as a liability in stead of equity. This tip will look at when shares are equity and when it represents a liability.View PDF