Introduction
The statement of stockholders’ equity is an important financial statement that provides information about the changes in a company’s equity over a specific period. It includes various accounts that reflect the company’s ownership interests and the changes in those interests. In this article, we will explore which of the following accounts are typically included in the statement of stockholders’ equity.
Common Stock
Common Stock is one of the primary accounts found on the statement of stockholders’ equity. It represents the ownership interest of the common shareholders in the company. Common stockholders have voting rights and are entitled to a share of the company’s profits through dividends.
Preferred Stock
Another account that may be included in the statement of stockholders’ equity is Preferred Stock. Preferred stock represents a class of stock that has certain preferences over common stock, such as a fixed dividend rate or priority in receiving assets in the event of liquidation. Preferred stockholders typically do not have voting rights.
Additional Paid-in Capital
Additional Paid-in Capital is the amount of capital that shareholders have contributed to the company in excess of the par value of the stock. When shares are issued at a price higher than their par value, the difference is recorded as additional paid-in capital. This account reflects the amount of money the company has received from shareholders in exchange for shares.
Treasury Stock
Treasury Stock represents shares of a company’s own stock that it has repurchased from the market. When a company buys back its own shares, it reduces the number of outstanding shares and increases the ownership percentage of the remaining shareholders. Treasury stock is recorded as a negative amount in the stockholders’ equity section of the balance sheet.
Retained Earnings
Retained Earnings is a key account on the statement of stockholders’ equity. It represents the accumulated profits of the company that have not been distributed to shareholders as dividends. Retained earnings increase when the company generates profits and decrease when dividends are paid out or when there are net losses.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (AOCI) is a separate section of the statement of stockholders’ equity that includes gains and losses that are not included in the net income calculation. These gains and losses are typically related to items such as foreign currency translation adjustments, unrealized gains or losses on available-for-sale securities, and changes in the value of certain derivative instruments.
Conclusion
In conclusion, the statement of stockholders’ equity includes various accounts that reflect the ownership interests and changes in those interests. Common stock, preferred stock, additional paid-in capital, treasury stock, retained earnings, and accumulated other comprehensive income are some of the accounts commonly found on this statement. Each account provides valuable information about the company’s equity structure and the changes that have occurred over a specific period.
References
– Investopedia: https://www.investopedia.com/terms/s/statementofstockholdersequity.asp
– AccountingTools: https://www.accountingtools.com/articles/2017/5/14/statement-of-stockholders-equity
