Textbook Notes (363,141)
United States (204,418)
ACCTG 201 (13)
De Boskey (12)
Chapter 10

ACCTG 201 Chapter 10: acctg textbook notes - ch 10

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San Diego State University
De Boskey

Three Classifications of Stockholders’ Equity • paid-in capital – the amount stockholders have invested in the company • retained earnings – the amount of earnings the corporation has kept or retained (not paid in dividends) • treasury stock – the corporation’s own stock that it has reacquired Invested Capital • invested capital – the amount of money paid into a company by its owners • corporation – an entity that is legally separate from its owners and even pays its own income taxes Corporations • articles of incorporation – describe (a) the nature of the firm’s business activities, (b) the shares of stock to be issued, (c) the initial board of directors • organization chart – traces the line of authority for a typical corporation • angel investors – wealthy individuals in the business community, like those featured in Shark Tank, willing to risk investment funds on a promising business venture • venture capital firms – provide additional financing, often in the millions, for a percentage of the company • initial public offering (IPO) – the first time a corporation issues stock to the public • stages of equity financing 1. investment by the founders of the business 2. investment by friends and family of the founders 3. outside investment by “angel” investors and venture capital firms 4. initial public offering (IPO) • publicly held corporation – trades on the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), or by over-the-counter (OTC) trading; regulated by the Securities and Exchange Commission (SEC) meaning there are more reporting and filing requirements • privately held corporation – does not allow investment by the general public and normally has fewer stockholders than a public corporation • stockholder’s rights 1. right to vote 2. right to receive dividends 3. right to share in the distribution of assets • advantages of a corporation o limited liability – guarantees that stockholders in a corporation can lose no more than the amount they invested in the company, even in the event of bankruptcy o ability to raise capital and transfer ownership • disadvantages of a corporation o additional taxes ▪ double taxation – corporate income is taxed once on earning at the corporate level and again on dividends at the individual level o more paperwork • “S corporation” allows a company to enjoy limited liability as a corporation, but tax treatment as a partnership Common Stock • authorized stock – the total number of shares available to sell, stated in the company’s articles of incorporation Preferred Stock Treasury Stock 2 Earned Capital Retained Earnings • retained earnings – the earnings retained in the corporation; earnings not paid out as dividends 𝑟𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠 = 𝑎𝑙𝑙 𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑠𝑖𝑛𝑐𝑒 𝑡ℎ𝑒 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑏𝑒𝑔𝑎𝑛 − 𝑎𝑙𝑙 𝑑𝑖𝑣𝑖𝑑𝑛𝑒𝑑
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