They are recorded in Equity, but they aren't shareholders.
They have "other ownership interest", that is, the ownership upon Liquidation, when they get paid back first with their Liquidation Right.
Their security is an obligation (compromise of repayment)
The shareholders hold common stocks. The real thing: claim on future profits, voting right, claim on the Retained Earnings account, etc.
The Preferred Stockholders are called "the others".
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