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...
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...
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...
What is the difference between stockholder and shareholder? Definition of Stockholder and Shareholder The term stockholder or shareholder typically describes an investor who own shares of a corporation’s common stock....
What is the meaning of arrears? In accounting we use the word arrears in at least two ways. One use involves the omitted dividends on cumulative preferred stock. For example, if a corporation has cumulative preferred...
What is the difference between stocks and bonds? Definition of Stocks Stocks, or shares of capital stock, represent an ownership interest in a corporation. Every corporation has common stock. Some corporations issue...
in the heading of SCF. Examples of Financing Activities Sources of cash provided by financing activities include: Borrowing money on a short-term basis and/or long-term notes basis from a bank or other lenders...
Also referred to as a shareholder. The owner of shares of stock in a corporation. Every corporation has common stock and those owners are known as common stockholders. Some corporations also issued preferred stock and...
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...
What is the tax advantage when bonds are issued instead of stock? Definition of Bonds and Stock In this context, bonds refers to bonds payable, a form of long-term debt that typically promises to pay interest every six...
, the company lists the cash inflows and cash outflows from: Borrowing and repaying short-term loans Borrowing and repaying long-term loans and other long-term liabilities Issuing or reacquiring its own shares of common...
How are dividends paid when there are dividends in arrears? Definition of Dividends in Arrears Dividends in arrears exist when a corporation has: Cumulative preferred stock Omitted past dividends on the cumulative...
’ equity consists of the amounts the corporation had received from the sale of its common and preferred shares of stock plus the earnings of the corporation minus any distributions to the stockholders. In other words,...
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 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.
Dividends Affect the Financial Statements When a corporation’s board of directors declares a cash dividend on its stock, the following will occur: Retained earnings (a part of stockholders’ equity) will decrease...
is a temporary account that records the proprietor’s draws during the year. At the end of the year, the account’s debit balance will be closed to owner’s capital account A corporation will likely have the...
What is a stockholder? Definition of Stockholder A stockholder (also known as a shareholder) is the owner of one or more shares of a corporation’s capital stock. A stockholder is considered to be separate from the...
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...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
The day after the record date for a cash dividend on shares of stock. Theoretically, the market price of the stock should drop on this day by the amount of the dividend.
See paid-in capital in excess of par value – common stock, or paid-in capital in excess of par value – preferred stock.
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
A stated legal amount often appearing on preferred stock, bonds, and some common stock.
The amount at which the holder of preferred stock or bonds must sell the stock or bonds back to the issuing corporation. The call price is disclosed in the indenture. The call price might be the face or par amount plus...
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...
Where do preferred stocks go on the P&L? The amount received from issuing preferred stock is reported on the balance sheet within the stockholders’ equity section. Only the annual preferred dividend is reported on...
A bond (long term note) that can be exchanged by the holder for a specified number of shares of stock in the company. The convertibility feature usually allows for the bond to have a lower interest rate when it is...
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
What is the definition of capital market? Often, capital market refers to the structured market for trading stocks and bonds. Examples are the New York Stock Exchange, the American Stock Exchange, NASDAQ, and the New...
What is the dividend yield? The dividend yield is the annual cash dividend per share of common stock divided by the market price of a share of the common stock. Usually, fast growing corporations have a low dividend...
What is the price earnings ratio? The price earnings ratio, or P/E ratio, is the market price per share of common stock divided by the earnings per share of common stock. A corporation with a high price earnings...
the heading financing activities statement of stockholders’ equity as a subtraction from retained earnings Dividends that were declared but not yet paid are reported on the balance sheet under the heading current...
the financial results of the entire group’s transactions with people and companies outside of the group. Most of the financial statements of large corporations with shares of stock trading on a stock exchanges appear...
When will a transaction affect only one side of the accounting equation? Only one side of the accounting equation will be affected when one asset is used to acquire another asset or to replace another asset, when one...
What does the term arrears mean in accounting? Definition of Arrears In accounting, the term arrears will be used in the following situations: If a corporation does not declare and pay the dividend on its cumulative...
a regular corporation and invest cash in exchange for shares of the new corporation’s common stock, Cash will be debited and the account Common Stock will be credited. (If the common stock has a par value, Paid-in...
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