18 Ch. 18 - Shareholders' Equity

18 Ch. 18 - Shareholders' Equity - Shareholders Equity...

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Shareholders’ Equity Chapter 18
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1. Describe the components of shareholders’ equity and explain how they are reported in a statement of shareholders' equity. 2. Describe comprehensive income and it components. 3. Record the issuance of shares when sold for cash and noncash consideration. 4. Describe what occurs when shares are retired and how the retirement is recorded. 5. Distinguish between accounting for retired shares and treasury shares. 6. Describe retained earnings and distinguish it from paid-in capital. 7. Explain the basis of corporate dividends, including the similarities and differences between cash and property dividends. 8. Explain stock dividends and stock splits and how we account for them. Learning Objectives – Shareholders’ Equity 2
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Sole Proprietorship – Single Capital Account: John Doe, Capital Partnership – Multiple Capital Accounts: John Doe, Capital; Mary Smith, Capital Corporation – Stockholders’ Equity Contributed Capital – Common Stock and possibly other classes of stock Retained Earnings Shown in declining order of permanence Sole Proprietorship – Single individual; unlimited personal risk; flow-through taxation Partnership – 2 or more individuals or entities; unlimited personal risk; flow-through taxation - General Partnership: 2 or more general partners - Limited Partnership: at least 1 general partner and 1 limited partner - Joint Venture: “association” created for a specific purpose. Limited Liability Company (LLC) – all members have limited liability; no stock; flow-through taxation Professional Corporation (PC) – similar to LLC but used for professional practices (accounting & financial services, legal services, architects, medicine). No limited liability when it comes to malpractice. Corporation – stock investment; limited liability; double taxation - C or Regular Corp: Large corporation - Small corporations - S Corporations: Tax option corporation or flow-through corporation; up to 100 shareholders Short hand for the section of the Internal Revenue Code that discusses the taxation of each. Types of Business Entities Types of Ownership 3
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Special characteristics of the corporate form State Corporate Law Corporation must submit articles of incorporation to the state in which incorporation is desired. Accounting for stockholders’ equity follows the provisions of each states business incorporation act. Established under state law Limited liability for Limited liability for investors investors Double taxation: Entity Double taxation: Entity & Shareholder & Shareholder Not-for-profit: hospitals, Not-for-profit: hospitals, charities and government charities and government agencies. agencies. Use of capital stock Use of capital stock or share system or share system Easy transferability of Easy transferability of ownership interest ownership interest High compliance cost: High compliance cost: SEC, SOX, State SEC, SOX, State Publicly-held Publicly-held corporations whose corporations whose shares are widely owned.
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This note was uploaded on 10/23/2009 for the course MGMT 401 taught by Professor Merlot during the Spring '09 term at Indiana Institute of Technology.

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18 Ch. 18 - Shareholders' Equity - Shareholders Equity...

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