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CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 15-3 Preparing a Statement of Stockholder’s Equity.

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Presentation on theme: "CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 15-3 Preparing a Statement of Stockholder’s Equity."— Presentation transcript:

1 CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 15-3 Preparing a Statement of Stockholder’s Equity

2 CENTURY 21 ACCOUNTING © Thomson/South-Western STOCKHOLDERS’ EQUITY ACCOUNTS USED BY A CORPORATION A corporation’s ownership is divided into units Each unit of ownership in a corporation is known as a share of stock Each stockholder is an owner of a corporation Owners’ Equity accounts for a corporation normally are listed under a major chart of accounts division titled Stockholders’ Equity 2 LESSON 15-3

3 CENTURY 21 ACCOUNTING © Thomson/South-Western STOCKHOLDERS’ EQUITY ACCOUNTS USED BY A CORPORATION The investment of all stockholders is titled Capital Stock This would be equivalent to the Capital account in a merchandising business (There are a lot of “owners” in a corporation so we put all their ownership in the account Capital Stock) The amount earned by a corporation (Net Income) that is not distributed to stockholders as dividends is called Retained Earnings Retained earnings is equivalent to the Capital account in a merchandising business. The corporation’s ownership portion of earnings Earnings (Net Income) distributed to stockholders are called dividends Dividends is equivalent to the Drawing account in a merchandising business 3 LESSON 15-3

4 CENTURY 21 ACCOUNTING © Thomson/South-Western SECTIONS OF THE STATEMENT OF STOCKHOLDERS’ EQUITY A financial statement that shows changes in a corporation’s ownership for a fiscal period is called a statement of stockholders’ equity A statement of stockholders’ equity contains two major sections Capital stock Retained earnings 4 LESSON 15-3

5 CENTURY 21 ACCOUNTING © Thomson/South-Western CAPITAL STOCK SECTION OF THE STATEMENT OF STOCKHOLDERS’ EQUITY The amount of capital stock issued as of the beginning of the year is the beginning balance of the capital stock account. Additional stock transactions are recorded in the general ledger during the fiscal year The amounts in the capital stock section of the statement of stockholders’ equity are obtained from the general ledger account, Capital Stock The monetary value assigned to a share of stock & printed on the stock certificate is called par value 5 LESSON 15-3

6 CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 15-3 CAPITAL STOCK SECTION OF THE STATEMENT OF STOCKHOLDERS’ EQUITY 1 2 3 4 5 page 461 1.Heading 2. Capital Stock and Par Value 5.Total stock issued at the end of the year 3.Stock at the beginning of the year – write the number of shares & the dollar amount 4.Stock issued during the year – write the number of shares & the dollar amount

7 CENTURY 21 ACCOUNTING © Thomson/South-Western RETAINED EARNINGS SECTION OF THE STATEMENT OF STOCKHOLDERS’ EQUITY Net income increases a corporation’s total capital. Some may be retained by the corporation for business expansion Some may be distributed as dividends to provide stockholders with a return on their investments. Amounts used to prepare the statement of stockholders’ equity are obtained from the income statement & balance sheet columns of the work sheet 7 LESSON 15-3

8 CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 15-3 RETAINED EARNINGS SECTION OF THE STATEMENT OF STOCKHOLDERS’ EQUITY 1 2 3 4 page 462 4.Dividends declared 6 7 5 2.Beginning balance 7.Total stockholders’ equity 6.Ending balance3.Net income after federal income tax 5.Increase in retained earnings 1.Retained Earnings

9 CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 15-3 TERMS REVIEW statement of stockholders’ equity par value page 463


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