Accounting 102- Quiz 1

Separate Entitiy

A business that is treated as distinct from its creditors, customers and owners.

Creditors can satisfy their claims only against the assets of the corporation- not against the personal property of the corporation's owners.

Contributed Capital

The stockholders' investment in a corporation.

(A major means of financing)

Equity Financing

The issuing of stock to investors in exchange for assets.

Par Value

An arbitrary amount assigned to each share of stock. It must be recorded in the capital stock accounts.

Legal Capital

The number of shares issued multiplied by the par value. It is the minimum amount that a corporation can report as contributed capital.

Underwriter

The intermediary between the corporation and the investing public.

Start up and organizational costs

The costs of forming a corporation a corporation, which include state incorporation fees, attorneys' and accountants' fees, the cost of printing stock certificates, and other necessary expenditures.

Retained Earnings

The earnings of the corporation since its inception (start up) less any losses, dividends, or transfers to contributed capital. Usually reinvested in the business.

Treasury Stock

Shares of the corporation's own stock that is bought back into the open market.

"Statement of stockholders' equity"

Summarizes the changes in the components of the stockholders' equity section of the balance sheet.

Common Stock

The basic form of stock.

Preferred Stock

Stock that gives its owners preference over common stockholders in terms of receiving dividends and in terms of claims to assets if the corporation liquidates. (Priority stockholders)

Authorized Shares

The maximum number of shares that a corporations' charter allows it to issue.

Issued Shares

Shares that a corporation sells or otherwise transfers to stockholders.

Outstanding Shares

Shares that a corporation has issued and that are still in circulation. A corporation may have more shares issued than are currently outstanding if it has bought back treasury shares.

Noncumulative Preferred Stock

A type of stock for which a company is under no obligation to make up for missed dividends in future years, if the board of directors fails to declare a dividend.

Cumulative Preferred Stock

A type of stock for which the dividend amount per share accumulates from year to year (if unpaid), and is an obligatory payment on behalf of the company, prior to paying any dividends on the common stock.

Convertible Preferred Stock

Preferred stock that can be exchanged for shares of common stock at a ratio stated in the preferred stock contract.

Callable Preferred Stock

Preferred stock that can be redeemed by the issuing corporation at a price stated in the preferred stock contract.

Dividend

A distribution of the earnings (which are now assets) that a corporation has generated over time.

(Given to stockholders, usually in cash, in proportion to the number of shares owned.)

Declaration Date

The date on which the board of directors formally declares that the corporation is going to pay a dividend.

This is when the liability for Dividends Payable is recorded.

Record Date

The date on which the ownership of the stock is determined.

Payment Date

The date on which the dividend is paid.

Stock Split

Occurs when a corporation increases the number of shares of stock issued and outstanding and reduces the par or stated value proportionately.