Chapter 15会计英语.ppt

Explain the major characteristics of a corporation. Understand the concept of share capital Understand the concept of shareholders’ equity Record the issuance of stocks Prepare the entries of dividends Understand temporary difference and permanent differences. * * Chapter 15 Shareholders’ Equity Outline of Chapter 15 The Characteristics of a Corporation Share Capital Shareholders’ Equity Issuing Stock Accounting for Dividends Accounting for Income Taxes Retained Earnings 15.1 The Characteristics of a Corporation The major advantages of corporation are summarized as follows: 1. Corporate management - professional managers 2. Separate legal existence 3. Limited liability of shareholders 4. Deferred or reduced taxes 5. Transferable ownership rights 6. Ability to acquire capital 7. Continuous life The major disadvantages are: 1. Corporation management - ownership separated from management 2. Increased costs and complexity to adhere to government regulation 3. Additional taxes 15.2 Share Capital Share capital represents the capital provided by the owners of the business firm. This may be a combination of the start-up capital and the retained earnings which results from the accumulated profit. There are many types of share capital, including: ordinary shares, preferred shares, non-voting shares, redeemable shares and treasury shares. The classification depends on the rights associated with the shares. Shareholders can sell their shares to any person, either directly or indirectly. The shares of the corporation are traded on stock exchanges. 15.3 Shareholders’ Equity The two basic sources of shareholders equity are : (l) investment by the shareholders (contributed capital); (2) earnings from profitable operation of the business (retained earnings). The shareholders’ equity section of a corporation’s balance sheet consists of: 1. Contributed (paid-in) capital - the term used to des