Kế toán, kiểm toán - Chapter 11: Stockholders’ equity: paid - In capital

Stockholders’ Equity:Paid-In CapitalChapter 11Existence is separate from owners.An entity created by law.Has rights and privileges.Privately, or Closely HeldPublicly HeldOwnership can be CorporationsLimited personal liability for stockholdersTransferability of ownershipProfessional managementContinuity of existenceAdvantages of IncorporationHeavy taxationGreater regulationCost of formationSeparation of ownership and managementDisadvantages of IncorporationThe costs associated with incorporation are usually expensed immediately, but amortized over 5 years for tax purposes.Formation of a CorporationEach corporation is formed according to the laws of the state where it is located.The application for corporate status is called the Articles of Incorporation.StockholdersRightsVoting (in person or by proxy).Proportionate distribution of dividends.Proportionate distribution of assets in a liquidation.Rights of StockholdersUltimate controlRights of StockholdersStockholders usually meet once a year.Functions of the Board of DirectorsPrimary functions are to set corporate policies ad protect stockholders.Chief AccountantContractual and legal representationCustodian of fundsFunctions of the Corporate OfficersPublicly Owned Corporations Face Different Rules By law, publicly owned corporations must:Prepare financial statements in accordance with GAAP.Have their financial statement audited by an independent CPA.Comply with federal securities laws.Submit financial information for SEC review.Stockholders usually meet once a year.Stockholder ledgers are often maintained by a stock transfer agent or stock registrar.Stockholder Records in a CorporationEach unit of ownership is called a share of stock.Stock certificates serve as proof that a stockholder has purchased shares.When the stock is sold, the stockholder signs a transfer endorsement on the back of the stock certificate.Stockholders’ Equity of a CorporationUnissuedSharesTreasurySharesOutstandingSharesTreasury shares are issued shares that have been reacquired by the corporation.IssuedSharesOutstanding shares are issued shares that are owned by stockholders.AuthorizedSharesAuthorization and Issuanceof Capital StockCommon stock can be issued in three forms:No-Par Common StockPar Value Common StockStated Value Common StockAll proceeds credited to Common StockTreated like par value common stockStockholders’ EquityLet’s examine this form of stock.Preferred StockA separate class of stock, typically having priority over common shares in . . .Dividend distributions (rate is usually stated).Distribution of assets in case of liquidation.Cumulative dividend rights.Normally has no voting rights.Usually callable by the company.Other Features Include:End of Chapter 11