A publicly or privately held company, also known as a corporation, is an entity separate and distinct from its stockholders. When an investor puts money in a company in return for part ownership, the company issues stocks to the investor. Stock is the evidence of the ownership interest of the stockholder. Sometimes a company also reacquires some of its outstanding stocks from its stockholders for retiring, holding, or reselling purposes. Stocks reacquired and held with the company are called treasury stocks. Companies often decide to share part of their net income, called dividends, with stockholders as reward for stockholders' investment risk in the company. Implications of issuing common and preferred stocks, treasury stocks, and dividends are very significant for companies' accounts.
This course presents basic concepts and accounting treatments involving companies' common and preferred stocks, treasury stocks, and dividends. The course aims at identifying key characteristics of incorporated organizations and how common equity transactions affect their financial position. It walks you through the accounting treatments for common, preferred, and treasury stocks. You are also taught how to record transactions involving cash and stock dividends.Learning Objectives
- Identify major characteristics of incorporated organizations
- Identify how common equity transactions affect a corporation's financial position
- Record the issuance of stock in a journal
- Account for the purchase and sale of treasury stock using the cost method
- Account for transactions involving cash dividends and stock dividends