There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion: Cumulative preference share capital is the share capital on which unpaid amount of dividend of a particular year is to be paid in the next year along with the dividend of next year.
Reasoning: Participating preference share capital holders have right to participate in the decision making activities.

Both A and R are incorrect

The correct answer is option 4- Both A and R are incorrect.

Cumulative preference shares give shareholders the right to receive cumulative dividend payouts from the company even if they are not profitable. These dividend will be counted as arrears in years when the company is not profitable and the same will be paid in full from the year when the business is profitable. Thus, the Assertion is wrong that unpaid dividend will be paid next year along with the dividend due for next year. It is not guaranteed that it will be paid next year.

A preference share that carries a right to a profit share in addition to, or instead of, a fixed dividend is called participating preference shareholder. The profit share, which is referred to as a participating dividend, is generally specified as a right to a particular percentage of the company's profits.