Acc 423
Gen480 - Owner’s Equity Paper
Gen 480 - The balance sheet of a corporation reports capital stock, additional paid-in capital, and retained earnings in the stockholders’ equity section, revenues and expenses are reported on the income statement and dividends are reported in the statement of retained earnings. Any changes in revenues, expenses, or dividends during the accounting cycle affect stockholders’ equity because they are transferred to retained earnings at the end of the period. An investor in a corporation should analyze the balance sheet to gain an understanding of the corporation’s capital structure. The purpose of this paper is to help investors determine the importance of paid-in capital, earned capital, and basic and diluted earnings per share.
Acc423 - Capital stock and additional paid-in capital make up paid-in capital. Capital stock is the par or stated value of the issued shares of stock and additional paid-in capital is the excess that is paid in over par or stated value. “Paid-in capital is the total amount paid in on capital stock-the amount provided by stockholders to the corporation for use in the business.” (Intermediate Accounting 12th ed., pg. 729) Earned capital is the profit an organization makes and consists of all undistributed income that remains invested in the company. Paid-in capital and earned capital must be kept separate for legal and economic reasons. Legally, dividends can be declared out of earned capital in all states but in many states, dividends cannot be declared out of paid-in capital. Economically, management, stockholders and others look to earnings for the continued existence and growth of the corporation. The balance sheet can help management and stockholders evaluate the possibility of future cash dividends or the buyback of shares by assessing the corporation’s liquidity. Acc 423
Acc 423
Gen 480 - The balance sheet of a corporation reports capital stock, additional paid-in capital, and retained earnings in the stockholders’ equity section, revenues and expenses are reported on the income statement and dividends are reported in the statement of retained earnings. Any changes in revenues, expenses, or dividends during the accounting cycle affect stockholders’ equity because they are transferred to retained earnings at the end of the period. An investor in a corporation should analyze the balance sheet to gain an understanding of the corporation’s capital structure. The purpose of this paper is to help investors determine the importance of paid-in capital, earned capital, and basic and diluted earnings per share.
Acc423 - Capital stock and additional paid-in capital make up paid-in capital. Capital stock is the par or stated value of the issued shares of stock and additional paid-in capital is the excess that is paid in over par or stated value. “Paid-in capital is the total amount paid in on capital stock-the amount provided by stockholders to the corporation for use in the business.” (Intermediate Accounting 12th ed., pg. 729) Earned capital is the profit an organization makes and consists of all undistributed income that remains invested in the company. Paid-in capital and earned capital must be kept separate for legal and economic reasons. Legally, dividends can be declared out of earned capital in all states but in many states, dividends cannot be declared out of paid-in capital. Economically, management, stockholders and others look to earnings for the continued existence and growth of the corporation. The balance sheet can help management and stockholders evaluate the possibility of future cash dividends or the buyback of shares by assessing the corporation’s liquidity. Acc 423
Acc 423