Oowner's Equity

Paper Summary:

The paper defines "owner's equity" and explains that the portion in a balance sheet of a corporation relating to the equity of stockholders include the paid-in or contributed capital invested and also the retained earnings. The paper continues and explains the various financial terms in analyzing stockholder's equity and relates the situation of owner's equity.

Outline:
Introduction
Why is it important to keep paid-in-capital separate from earned capital?
As an investor is paid-in or earned capital more important? Why?
As an investor, are basic or diluted earnings per share more important? Why?

From the Paper:

"The 'Paid in capital', is often categorised more particularly as 'paid in surplus' 'additional paid in capital' or 'capital surplus'. These are differentiated from 'Retained Earnings' or in terms of its earlier distinction, 'Earned Surplus'. 'Retained Earnings' are differentiated from the 'paid-in-capital' or 'contributed capital', which indicates to the capital obtained in lieu of the stocks, that is often indicated by the 'Capital Stock' or that of 'Capital Surplus' and 'Donatee Stock' or 'Donated Surplus'. The 'Stock Dividends' which is the sharing of extra shares of capital stock having no cash receipt-decrease the 'Retained Earnings' and enhance 'Capital Stock'. The 'Retained Earnings' also known as 'Earned Capital' including the aggregate of all capital accounts appear to be the net worth of a company."

Sample of Sources Used:

• Ayre, Randolph J; Basri, Carole L; Kagan, Irving. Corporate Legal Departments. Practising Law Institute. 1990.
• Balance Sheet. <http://www.npcsbdc.com/Balance%20Sheet%20Explanation.doc>
• Brown, Robert; Gutterman, Alan S. Emerging Companies Guide: A Resource for Professionals and Entrepreneurs. American Bar Association. 2005.
• Chapter 11: Reporting and Analyzing Stockholder's Equity. <http://www.smccd.net/accounts/nurre/online/chtr11fa.htm>
• Chapter 14: Review. <http://faculty.seattlecolleges.com/jnordlin/ACC220/CH14/LN/CH14LN.htm>

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