Owners EquityPPT学习教案

1、会计学1Owners EquitySection 1Ownerships of Business Entities第1页/共24页take out of the following three alternative legal forms:BusinessesProprietorshipsProprietorships a business that is owned by one person and is not organized as a corporation the owners equity is reported by means of a single capital ac

2、count.PartnershipsPartnerships an unincorporated association of two or more persons to carry on a business for profit as co-owners. capital accounts are established for each partner.第2页/共24页CorporationsCorporations a separate legal entity chartered(or incorporated)under laws in different jurisdictio

3、n.The ownership(or equity)of a corporation is divided into inits called shares of stock,and the individuas or organizations that own these shares are called shareholders or stockholders.The advantages of corporations are as follows:a.Corporations are separate legal entities.b.Corporations have conti

4、nuity of life.c.Shareholders are not liable for the corporations debts.d.Stockholders are not agents of the corporation.e.Ownership rights can be easily transferred.Disadvantagesa.The income of a corporation is taxed twice,b.corporations are generally subject to more regulations than other businesse

5、s第3页/共24页Section 2Sole Proprietorship and Partnerships Accounting第4页/共24页Sole Proprietorship and Partnerships Accounting1.Opening the accounts of a new partnership2.Additional investments3.Closing the accounts of a partnership at year-end4.Income statement for a partnership5.Statement of partners eq

6、uity第5页/共24页Sole Proprietorship and Partnerships Accounting In most respects, partnership accounting is similsr to that in a sole proprietirship except there are more owners.As a resule, a separate capital account and drawing account is maintained for each partner. Partnerships recognize no salaries

7、 expense for services provided to prganization by the partners. Accounts paid to partners are recorded by debiting partners drawing account.第6页/共24页1.Opening the accounts of a new partnership The journal entries to open the accounts of the partnership: Dr. Cash *,* Accounts Receivable *,* Inventory

8、*,* Accounts Payable *,* Cr. Capital *,*2.Additional investments After six months of poeration the firm is in need of more cash, and the partners make additional investments of $10,000 each on July1. These additional investments are credited to the capital accounts as shown below:To record additiona

9、l investmentsDr. Cash 20,000 Cr. A man Capital 10,000 B man Capital 10,000第7页/共24页3.Closing the accounts of a partnership at year-end At the end of the accounting period, the balance in the Income Summary account is closed into the partnerscapital accounts.The profits or losses of a partnership may

10、be divided among the partners in any manner agreed upon by the p artners.Ex: Adams and Brown have agreed to share profits equally.Assuming that the partnership earns net income of $60,000 in the First year of operations, the entry to close the Income Summary account is as follows: (1) To divide net

11、income for the year in accordance with partnership agreement to share profits equally. The next step in closing the accounts is to transfer the balance of each partners drawing account to his capital account.Assuming that withdrawals during the year amounted to $24,000 for Adams and $16,- for Brown,

12、 the entry at December31 to close the drawing accounts is as follows: Dr. Income Summary 60,000 Cr. Joan Adams, Capital 30,000 Richard Brown,Capital 30,000 (2) To transfer debit balances in partners drawing accounts to their respective capital accounts. Dr. Joan Adams, Capital 24,000 Cr. Richard Bro

13、wn,Capital 16,000 Dr. Joan Adams, Drawing 24,000 Cr. Richard Brown, Drawing 16,000第8页/共24页Section 3Rights and Privilege of Shareholders第9页/共24页Rights and Privilege Rights and Privilege of Shareholders of Shareholders1.Rights and Privilege of Common Shareholders2.Rights and Privilege of Preferred Sha

14、reholders第10页/共24页1.Rights and Privilege of Common ShareholdersThe basic rights of common stockholder include the following:(1) Voting right(2) Dividends & Liquidation participation right(3) Preemptive right2.Rights and Privilege of Preferred Shareholders Participation in earnings beyond the stipula

15、ted dividend rate; a cumulative feature, affording the preferred shareholders the protection that their dividends in arrear 第11页/共24页Difference between common stock and preferred stock Preferred shareholders are owners who have certain rights superior to those of common shareholders. preferred stock

16、 will be fully satisfied before the common shareholders participate in any earnings distribution; and convertibility or call ability by the corporation. In exchange for the preferences,the preferred shareholders rights are limited. The right to vote, and the right to participate withou limitation in

17、 the earnings of the corporation, may be restricted to common shareholders.第12页/共24页Section 4Capital vs. Retained Earnings第13页/共24页 Owners equity in a corporation is defined as stockholders equity, shareholders equity,or corporate capital.An example of a stockholders equity section of a corporation

18、balance sheet is shown below: Stockholders equity Paid-in capital Common stock. 330,000 Retained earnings 80,000 Total stockholders equity 410,000 Stockholdersequity normally includes the following three categories: Capital stock Additional paid-in capital(In China.it is called capital surplus.) Ret

19、ained earnings (In China,it is called undistributed profit.) Capitals stock and additional paid-in capital constitute contributed (paid-in) capital while retained earnings represent the earned capital of the enterprise.Capital vs. Retained Earnings第14页/共24页Section 5Issuance of Shares第15页/共24页Issuanc

20、e ofShares1.Par value stock2.No-par value stock第16页/共24页1.Par value stock If the stock has par value, stockholders permanent investment is equal to the number of shares outstanding times the par value of each share. Sometimes a corporation may issue par value stock at a price in exvess of par,then t

21、he stock is said to be issued at a premium Issuance of par value stock When shares are issued, net assets and equity increase by fair value of assets given to corporation.The capital stock account is credited for the par value of the stock issued.The excess over par is credited to a descriptively na

22、med paid-in capital in excess fo par account to record source in detail. In China, we use capital surplus account instead of paid-in capital in excess of par account.第17页/共24页2.No-par value stock If the stock is No-par valuestock,investment of stockholder is an arbitrary amount that the board assign

23、s to the stated capital account. Corporations may issue no-par value stock for the following reasons: To avoid the stocks werre issued at a discount; To avoid confusion over the relationship between the par value and fair market value. Issuance of no-par value stock Please notice that treatment of p

24、ar value stock is quite different from no-par value stock.No-par stock with a stated(or assigned) value is accounted for in the same manner as discussed for par value stock because the ststed value places the no-par stock on essentially the same basis as par value stock. True no-par stock,when sold,

25、 is recorded as a credit to the capital stock account.Thus the capital stock account should be credited for the full amount received. In this case, no paid-in capitalin excessis recorded.第18页/共24页Section 6Retained Earnings第19页/共24页Retained Earnings1.Appropriated retained earnings2.Dividends and stoc

26、k split1) Cash dividends2) Stock dividends3.Dividend declaration4. Stock split第20页/共24页1) Cash dividends Cash dividend is a pro rata distribution of cash to stockholders. For cash dividend to be paid, a corporation must have sufficient cash. There is no necessary relationship between the balance in

27、the retained earnings account and the balance in the cash account. The fact that the company reports large earnings does not mean that it has a large amount of cash on hand. The amount of distributed dividend is subject to retained earnings limit.2) Stock dividends Dividends may also be paid in the form of additional shares of stock rather than cash.This type of dividend is called stock dividend. Stock dividend is quite different from cash dividend.If dividends paid are in the form of cash, those dividends are taxable. To illustrate the accounting for sto