to as a draw.) A corporation’s board of directors, which is elected by the stockholders, decides if a cash dividend is needed. The considerations for paying or not paying a dividend include the stockholders’ wishes,...
to as a draw.) A corporation’s board of directors, which is elected by the stockholders, decides if a cash dividend is needed. The considerations for paying or not paying a dividend include the stockholders’ wishes,...
), and 2) financing activities (borrowing and repaying short-term and long-term debt, issuing and buying back shares of stock, paying dividends). Examples of Reporting the Cash from Operating Activities In the U.S., the...
in the total amount of a corporation’s stockholders’ equity: Positive net earnings or net income reported on the corporation’s income statement. Some positive Other Comprehensive Income items occurred but they are...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
What does per annum mean? Definition of Per Annum Per annum means yearly or annually. It is a common phrase used to describe an interest rate. Often “per annum” is omitted, as in “I have a 4% mortgage loan.” or...
, not a reduction of net income, and are not a liability until the board of directors declares the dividend. Dividends are recorded as a decrease in the corporation’s retained earnings. (Retained earnings is often a...
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...
What is retained earnings? Definition of Retained Earnings Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of dividends that were declared. Retained...
a company’s cash flow statement (or statement of cash flows). A variation of the above calculation is to also subtract the dividends to stockholders, if the dividends are viewed as a requirement. Example of Free Cash...
Retained earnings not available for dividends.
the changes that occurred during the accounting period in the corporation’s stockholders’ equity accounts. These general ledger accounts include common stock, preferred stock, retained earnings, accumulated other...
The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
requirement) divided by the weighted average number of shares of common stock outstanding. earnings per share (or) EPS A corporation’s net income (after the preferred dividend requirement) divided by the weighted...
the basic expression because “stockholders’ equity” is replaced with “Paid-in capital + Revenues – Expenses – Dividends – Treasury stock.” expanded accounting equation This algebraic expression differs...
What is capital surplus? Definition of Capital Surplus In the past, capital surplus was used to describe what is now referred to as paid-in capital in excess of par or Premium on Common Stock. Example of Capital Surplus...
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...
The following entry for a stock split is an example of a memorandum entry: “On June 7, 2023 a 2-for-1 stock split was declared for the common stockholders of record as of the end of the day on June 28, 2023. The stock...
A term meaning behind, such as dividends in arrears, or something occurring at the end of a period, such as the recurring payment in an annuity in arrears.
The amounts earned on money invested. Often this is interest and dividends earned on a company’s investment in stocks and bonds of other companies.
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...
The stockholders’ equity account that reports the amount paid to a corporation that is in excess of the common stock’s stated value. The stated value of each share issued is recorded in the Common Stock...
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...
permanent capital. Typically, a corporation issues shares of its common stock and receives cash for the stock’s fair market value. The transaction will be recorded with a debit to the Cash account and a credit to one...
of the __________ dividends per share divided by the earnings per share. Select... cash stock total of cash and stock 25. A new growth corporation with significant profit potential will likely have a __________ dividend...
An entry without debit or credit amounts. For example, assume that a corporation has 100,000 shares of $0.50 par value common stock before a 2-for-1 stock split. At the time of the split a memo entry would be entered in...
Why are bonds payable less costly than common stock? Bonds payable are less costly than common stock because the bonds issued by a corporation contain a formal contract to pay the investor a fixed amount of interest...
of a corporation’s balance sheet reports the difference in the amount of assets and liabilities. Its components include paid-in capital, retained earnings, and treasury stock. stockholders' equity (or)...
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...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Usually referred to as the SEC. The U.S. government agency which has regulatory power over the U.S. stock exchanges and the reporting requirements of the corporations whose stock is traded on those stock exchanges. The...
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
Accounts that have some restrictions. For example, an investment account and a cash account might be restricted for the construction of a new factory. The restrictions mean that these accounts be reported as a long-term...
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...
omitted, one of the transaction amounts may have had digits transposed, math errors may have occurred when calculating an account’s balance, etc. Today’s accounting software is coded to prevent these types of...
, a $20,000 amount will likely be immaterial for a large corporation with a net income of $900,000. However, the same $20,000 amount will be material for a small corporation with a net income of $40,000. Another view of...
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 Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
that the full amount will be converted to cash. Reason Why the Direct Write Off Method is Not Preferred The accounting profession does not prefer the direct method for the following reasons: The accounts receivable are...
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