Chapter 11 - Financial Accounting Chapter 11 Notes...

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Chapter 11 Author: Anna Rovira Beavers Needles 2008 8/6/07 1 Financial Accounting Chapter 11 Notes Contributed Capital I. Management Issues Related to Contributed Capital Contributed Capital is the capital raised by company from issuing stock. A. Forming a Corporation An organization files an application with the state. This application contains the articles of incorporation . These articles become a contract, called a company charter, between the state and the incorporation. They provide details about the corporation such as: Number of shares authorized Par value, if any Board of Directors Executive Management, or organization chart. The corporate form of business contained the following: 1. Stockholders These are the owners of the corporation. They become owners by purchasing shares of common stock 2. Board of Directors Stockholders elect the board of directors, which in turn decided on the major business policies of the corporation. 3. Management The board of directors appoints managers to carry out the corporation policies and run day-to-day operations. B. Managing the Corporation Form of Business Separate Legal Entity A corporation is a separate legal entity that has most of the rights of a person. A corporation can buy, sell, and own property. It can sue another party and can be sued. Limited Liability A corporation has responsible for its own actions and liabilities. That means that creditors entering into contracts with a corporation can only go after the corporation for payment and not the individuals in the corporation. Ease of Capital Generation Issuing stock is way that a corporation can easily raise capital. Centralized Authority and Responsibility The board of directors represents the stockholders and delegates the responsibility and authority for the day-to-day operations of the corporation to the president and its executive team.
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Chapter 11 Author: Anna Rovira Beavers Needles 2008 8/6/07 2 Government Regulations Corporation must meet the requirements of state lays. It also must file reports with the Securities and Exchange Commission and with the stock exchanges. C. Using Equity Financing – Terminology Authorized Stock Number of shares authorized by the state that a corporation can sale as found in the articles of incorporation. Types of Stock: Common Stock Shares of stock that carry voting rights but rank below preferred stock in terms of dividends and the distribution of assets. Preferred Stock
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Chapter 11 - Financial Accounting Chapter 11 Notes...

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