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Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...

A financial statement that reports the current year information contained in the general ledger account Retained Earnings. The statement will include the beginning balance, prior period adjustments, net income for the...

A stockholders’ equity account that generally reports the net income of a corporation from its inception until the balance sheet date less the dividends declared from its inception to the date of the balance...

What is retained earnings? Author: Harold Averkamp, CPA, MBA Definition of Retained Earnings Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of...

Are retained earnings an asset? Author: Harold Averkamp, CPA, MBA Definition of Retained Earnings Usually, retained earnings consists of a corporation’s earnings since the corporation was formed minus the amount that...

Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...

What type of account is the Dividends account? Author: Harold Averkamp, CPA, MBA Definition of Dividends Account When a corporation declares a cash dividend, the amount declared will reduce the amount of the...

What is "deficit" appearing in stockholders' equity? Author: Harold Averkamp, CPA, MBA Definition of Deficit Within Stockholders’ Equity The term deficit is used within the stockholders’ equity section...

Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...

How does revenue affect the balance sheet? Author: Harold Averkamp, CPA, MBA Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts...

Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...

account Cash and reduces the corporation’s stockholders’ equity account Retained Earnings. Some corporations will declare a stock dividend instead of (or in addition to) a cash dividend. A stock dividend distributes...

. If a common stock does not have a par value or a stated value, the entire proceeds from issuing the stock is credited to one account entitled __________ Common Stock. 12. Stockholder's equity is subdivided into...

Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...

Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...

Stockholders' Equity Author: Harold Averkamp, CPA, MBA 67 Q&A Popular Recent Where do dividends appear on the financial statements? How do you record a dividend payment to stockholders? What is equity? What is...

are a distribution of the corporation’s earnings. This explains why state laws likely require corporations to have a credit balance in Retained Earnings before declaring and paying dividends. Practically speaking, the...

The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...

Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...

income (earnings, profits). Dividends will reduce the corporation’s retained earnings which is reported in the stockholders’ equity section of the balance sheet. (A cash dividend also reduces the corporation’s...

positive net income causes an increase in the retained earnings, which is part of stockholders’ equity. A net loss will cause a decrease in retained earnings and stockholders’ equity. A sole proprietorship’s net...

the amounts in an Income Summary account.) The Income Summary is very temporary since it has a zero balance throughout the year until the year-end closing entries are made. Next, the balance resulting from the closing...

Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...

Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...

This term is used in place of retained earnings when the balance in the retained earnings account is negative (a debit balance).

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Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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