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Objective of the report
To be able to discuss the statement of
shareholders equity
To be able to understand the components ofshareholders equity
To be able to understand the statement of
changes in equity
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Shareholders equity
Shareholders equity formerly called Stockholders
equity
Shareholders equity represents the interest or
financial claim of the shareholders in the total asses of
the corporation after satisfying the claim of the creditor
who have priority over the assets in the event ofliquidation.
Shareholders equity is always equal to the net assets,
and can also be expressed in an equation
SHARE HOLDERS EQUITRY= ASSETS - LIABILITIES
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Under Philippine Accounting Standards
(PAS) and International AccountingStandards
The term equity without any qualificationrefers to the total shareholders equity.
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Authorized share capitalRepresents the total amount of
share capital the corporation is authorized to
put up or the total shares authorized to besold or issued expressed in peso.
This account is valued at par value
or stated value
Unissued share capital
Represents the share capital
not yet issued because either the
share capital is not yet sold or if
already sold is not yet fully paid hencestill unissued.
This account is valued at par
value or stated value
Authorized share
capital and unissued
share capital accountsare applicable only if
the journal entry
method is used for
recording capital
transactions
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Share capital
Represents the total share capital already issued
and valued at par or stated value (the subscription is fully
paid).
This account is used under the memo entry
method
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Subscriptions receivable
Represents the portion of the subscribed
share capital not yet collected
TreatmentThe Subscription Receivable account is a
deduction from Subscribed Share Capital account andthe net amount is added to the Issued Share Capital to
get the total Paid in Share Capital or Paid up Share
Capital
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Additional Share Capital Accounts
These account refer to the additional capital generated by
the corporation, which may come from any of the following sources..
Share premium
Represents the excess of the subscription price of a par
value share capital over the par value
Share Capital in excess of stated value
Represents the excess of the subscription price of no parvalue share capital over stated value
Share capital from donationrepresents donation received by the corporation from
private persons or from the local or foreign government
Treasury Share premium
Represents the gain on the reissue of treasury
shares.
Share capital from retirement of
Treasury sharesRepresents the gain on retirement of treasury
shares.
Share capital from Stock Dividendrepresents the excess of the fair market value of the
share capital on the date of dividend declaration over the par
value or stated value
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Share capital from Change of par to No Par Value
Represents the difference between the par value and the stated value of
the share capital being replaced.
Share capital from Change of No Par to Par value
Represents the difference between the stated value and the par value of
the share capital being replaced.
Share capital from Reduction of Par or Stated value
Represents the difference in the original Par or Stated value and the new
par or stated value.
Share capital from Conversion of Preference into
Ordinary Share
Represents the excess of the aggregate par or stated value of the
preference shares over the par or stated value of ordinary shares.
Treatment
Additional Share Capital accounts are added to the
Paid Up Capital to arrive at the Total Contributed Capital
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Stock dividends
DistributableRepresents the additional share
capital to be issued as a result of stock
dividend declaration but not yet distributed
as of the Balance sheet date.
This account will be presented below the
Total Contributed Capital
Retained Earnings
Represents the cumulativeearnings of the corporation
Unappropriated Retained Earnings
Refers to the portion of the total retained
earnings which is available for dividend distribution.
It also called Unrestricted or Free R.E
Appropriated Retained Earnings
Refers to that portion of the total retained earnings
appropriated for future contingencies or specific purposes
Treatment
Retained earnings account is added to thetotal contributed capital
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Treasury shares
Represent the corporations own share capital, its
a previously issued and later acquired but not yet reissued
or retired.
This is no longer in the hands of the shareholders,
its not entitled to dividend
TreatmentIt is a deduction from the
Shareholders equity. This is the last item or
account presented in the SHE
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Revaluation Increment
Represents the excess of the
appraised value of property, plant or
equipment over the historical cost
Treatment
It is an addition to the SHE
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Shareholders equity
As of dec. 31, 2010
Share capital xx
Share premium xx
Paid in share capital xx
Additional share capital:Share capital from donation xx
Share capital from stock dividend xx xx
Total contributed share capital xx
Retained earnings:
Unappropriated xx
Appropriated for building expansion xx xx
Revaluation Increment xx
Total SHE xx
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Statement of changes in equity
A statement of changes in equity can
be created for sole proprietorships, partnerships
or corporations. Sole proprietorships and
partnerships follow a similar format for theirstatements of changes in equity, while the
corporation format is slightly different. The
purpose of the statement is to summarize the
activity in the equity accounts for the period.
All the accounts affecting the
shareholders equity will be shown in this
financial statement.
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Shareholders equity
Share capital, P10 par value P250,000
Share premium 5,000Paid in share capital 255,000
Additional share capital
Share capital from donation P9,000
Share capital form stock dividend 6,000 15,000
Total contributed share capital P270,000Retained earnings
Unappropriated P280,000
Appropriated for building expansion 75,000 355,000
Revaluation Increment 25,000
Total Shareholders equity P650,000
Accounts affecting Shareholders equity
A. 5,000 additional shares were sold for cash at P11 per share
B. 30,000 cash dividend were declared
C. P60,000 of Retained earnings were appropriated for the creation of a sinking
fund
D. 1,000 treasury shares were acquired at P15/share.
E. Net income during the year was P94,000
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Meow corporation
Statement of changes in Equity
Year ended Dec. 31, 2011
Share Retained
capital Reserves earnings Total
Beg balances P250k P120k P280k P650,000
Addtl. Share issued 50k 50,000
Addtl. Share Premium 5k 5,000Net income 94k 94,000
Cash dividend (30k) (30,000)
Appropriated for
sinking fund (60k) (60,000)
Treasury shares @cost (15k) (15,000)
Ending balances P285k P125k P284k P674,000
Under reserves the ff. Are includedAdditional share capital
Appropriations to RE
Revaluation Increment
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Normal balances of the accounts
Authorized share capital= CREDIT (CR)
Unissued share capital= DEBIT (DR)Share capital= CREDIT (CR)
Subscribed share capital= CREDIT (CR)
Share premium
Share capital excess of stated value
Share capital from donationTreasury share premium
Share capital for retirement of treasury shares
Share capital for stock dividend
Share capital for change of par to no par
Share capital for reduction of par or stated value
Share capital for conversion of preference share capital to ordinary sharesStock dividend= CREDIT (CR)
Retained earnings= CREDIT (CR)
Revaluation Increment= CREDIT (CR)
Treasury shares= DEBIT (DR)
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