Accounting For Stocks

Stockholders' Equity

The part of what an owner has that belongs to the owners, calculated as Assets minus Liabilities.

Paid-in Capital

Amounts invested by shareholders when they buy shares of stock.

Retained Earnings

Accumulated net income not paid out in dividends, representing profits reinvested in the company.

Treasury Stock

Stock that has been repurchased by the issuing corporation and is held as a reduction of stockholders' equity.

Accumulated Other Comprehensive Income

Gains and losses not included in net income involving investment securities and other financial instruments.

Limited Liability

The legal status wherein owners are not personally liable for the debts of the corporation.

Double Taxation

Occurs when corporate income is taxed at both the corporate level and again as dividends to shareholders.

Common Stock

A class of stock that generally has voting rights and represents ownership in a corporation.

Preferred Stock

A class of stock that typically has a fixed dividend rate and has priority over common stock in asset distribution.

Cumulative Preferred Stock

Preferred stock for which unpaid dividends accumulate and must be paid before any dividends can be distributed to common stockholders.

Dividends

A distribution of a portion of a company's earnings to its shareholders.

Liquidating Dividend

A dividend that exceeds the retained earnings balance, representing a return of capital.

Stock Dividend

A dividend paid in additional shares of stock rather than in cash, affecting the proportionate ownership of shareholders.

Stock Split

An increase in the number of outstanding shares of a company with a proportional decrease in the share price.

Ex-Dividend Date

The date on which a stock begins trading without the value of its next dividend payment.

Par Value

An arbitrary value assigned to a share of stock, used for accounting purposes.

Treasury Stock Method

An accounting method for repurchased stock where treasury shares are held and may be reissued.

Retained Earnings Deficit

A debit balance in retained earnings, indicating the company has accumulated more losses than profits.

S-Corporation

A corporation with a limited number of owners that elects to pass income and losses directly to shareholders to avoid double taxation.

Limited Liability Company (LLC)

A business structure where owners are not personally liable for debts and which allows for flexible management.

Market Value

The current price at which an asset or service can be bought or sold in the marketplace.