Chapter12 UML 2007

Chapter12 UML 2007 - Ch. 12: Contributed Capital 1 Chapter...

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Ch. 12: Contributed Capital 1 Chapter 12 Contributed Capital In this chapter you will learn how contributed capital affects businesses, how it is controlled, accounted for, and reported in financial statements. What Is Contributed Capital? Chapters 10 and 11 examined current and long-term liabilities, which together represent one major source of resources for companies. Liabilities are the dollar amounts of borrowed resources. A second source of resources is owners. When corporations obtain resources through owners' investments, the resources are called assets and the source of resources is called contributed capital . Thus, a corporation's contributed capital represents the dollar amount of resources invested by its owners. In prior chapters, the source of owner-invested resources was called common stock. In the remainder of this text, the source of owner-invested resources will be called contributed capital to reflect the fact that there are different types of corporate owners and there are several accounts in which their investments are reported. The third major source of resources is operations, that is, management's generation of resources through the operation of the company. The source of management generated resources is called net income, which is eventually reported as part of retained earnings. This chapter examines contributed capital while retained earnings is examined in Chapter 13. In terms of the accounting equation, because owners have rights to amounts they invested and to resources generated by management (net income), contributed capital and retained earnings are both reported as parts of stockholders' equity, as shown below. The numbers in parentheses refer to the chapters in which the items are discussed.
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2 Ch. 12: Contributed Capital Assets Current Assets Cash and Cash Equivalents (6) Accts. Receivable (7) Allow. for Uncoll. Accounts (7) Merchandise Inventory (8) Property, Plant, & Equipment Land (9) Buildings (9) Accum. Depr., Buildings (9) Equipment (9) Accum. Depr., Equipment (9) Accum. Depr., Autos & Trucks (9) = Liabilities Current Liabilities Notes Payable (10) Accounts Payable (10) Taxes Payable (10) Current Portion of Long-term Debt (10) Long-term Liabilities Bonds Payable (11) Deferred Taxes (11) Obligations Under Capital Leases (11) + Stockholders' Equity Contributed Capital (12) Retained Earnings (13) Revenues Sales (7) Sales Returns & Allowances (7) Cost of Goods Sold (8) Operating Expenses Uncollectible Accounts Expense (7) Depreciation Salary & Wages Expense (10) Payroll Taxes Expense (10) Bank Service Exp. (6) Interest Revenue (6) Interest Gain or Loss on Disposal of Prop., Plt., & Eq. (9)
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Chapter12 UML 2007 - Ch. 12: Contributed Capital 1 Chapter...

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