SSNT_chap018_TS - Chapter 18 SHAREHOLDERS EQUITY Lecturer...

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1 SHAREHOLDERS’ EQUITY Chapter 18 Lecturer: Dr. Au Po Shu
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2 Learning objectives 1. Report the components of shareholders’ equity . 2. Describe the components of other comprehensive income . 3. Understand the corporate form of organization and the nature of stock. 4. Record the issuance of shares when sold for cash and noncash consideration. 5. Distinguish between accounting for retired shares and treasury shares . 6. Describe retained earnings and distinguish it from paid-in capital. 7. Describe different forms of corporate dividends , including the similarities and differences between cash and property dividends. 8. Accounting for stock dividends and stock splits . 9. Discuss the primary differences between U.S. GAAP and IFRS with respect to accounting for shareholders’ equity.
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3 Shareholders’ Equity A residual amount of the company’s assets after creditor claims have been met Assets – Liabilities = Shareholders’ Equity Net Assets
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4 The Nature of Shareholders’ Equity Shareholders’ Equity Paid-in Capital Retained Earnings Amounts earned by corporation Amounts invested by shareholders Accumulated Other Comprehensive Income Other gains and losses not included in net income Sources of Shareholders’ Equity (AOCI)
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5 Corporate forms of organization
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6 Types of Corporations Not-for-profit corporations include hospitals, charities, and government agencies such as FDIC. Privately-held corporations whose shares are owned by only a few individuals. Publicly-held corporations whose shares are widely owned by the general public.
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7 Hybrid Organizations Special types of organizations have characteristics of both regular corporations and partnerships 1. S Corporation (in USA only) S corporations are corporations that elect to pass corporate income/losses through to their shareholders (pass-through taxation) to avoid double taxation. 1. Limited liability company (LLC in USA) LLC is not a corporation, i.e. has no legal identity Owners’ liability limited to their investment. Number of owners is flexible, can be 1 to many 1. Limited liability partnership (LLP in USA) A partnership whose owners are liable for their own actions but not entirely liable for actions of other partners. Special types of organizations have characteristics of both regular corporations and partnerships 1. S Corporation (in USA only) S corporations are corporations that elect to pass corporate income/losses through to their shareholders ( pass-through taxation ) to avoid double taxation. 1. Limited liability company (LLC in USA) LLC is not a corporation, i.e. has no legal identity Owners’ liability limited to their investment. Number of owners is flexible, can be 1 to many 1. Limited liability partnership (LLP in USA) A partnership whose owners are liable for their own actions but not entirely liable for actions of other partners.
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