Stockholders’ Equity: List and Explanation

which of the following accounts is a stockholders equity account

Stockholders’ equity is also referred to as shareholders’ or owners’ equity. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

  • In the general ledger, the liability accounts will usually have credit balances.
  • These earnings, reported as part of the income statement, accumulate and grow larger over time.
  • Therefore, debt holders are not very interested in the value of equity beyond the general amount of equity to determine overall solvency.
  • Stockholders’ equity is equal to a firm’s total assets minus its total liabilities.
  • The value of $60.2 billion in shareholders’ equity represents the amount left for stockholders if Apple liquidated all of its assets and paid off all of its liabilities.

Dividend payments by companies to its stockholders (shareholders) are completely discretionary. Companies have no obligation whatsoever to pay out dividends until they have been formally declared by the board. There are four key dates in terms of dividend payments, two of which require specific accounting treatments in terms of journal entries. There are various kinds of dividends that companies may compensate its shareholders, of which cash and stock are the most prevalent. In summary, total stockholders’ equity equals total paid-in capital plus retained earnings minus treasury stock. Since equity accounts for total assets and total liabilities, cash and cash equivalents would only represent a small piece of a company’s financial picture.

Treasury Stock

Retained Earnings (RE) are business’ profits that are not distributed as dividends to stockholders (shareholders) but instead are allocated for investment back into the business. Retained Earnings can be used for funding working capital, fixed asset purchases, or debt servicing, among other things. Stockholders Equity provides highly useful information when analyzing financial statements.

Long-term liabilities are obligations that are due for repayment in periods longer than one year, such as bonds payable, leases, and pension obligations. Contributed Surplus represents any amount paid over the par value paid by investors for stocks purchases that have a par value. This account also holds different types of gains and losses resulting in the sale of shares or other complex financial instruments.

Additional Paid-In Capital on Common Stock

Finally, the number of shares outstanding refers to shares that are owned only by outside investors, while shares owned by the issuing corporation are called treasury shares. The preferred stock account contains the portion of the price paid by investors for a company’s preferred stock that is attributable to the par value of the stock. Investors statement of stockholders equity contribute their share of paid-in capital as stockholders, which is the basic source of total stockholders’ equity. The amount of paid-in capital from an investor is a factor in determining his/her ownership percentage. Current liabilities are debts typically due for repayment within one year, including accounts payable and taxes payable.

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