In The Name of Allah The Most Beneficent The Most Merciful.

PRESENTED TO:

Farooq Ahmad

Institute of Business Management & Sciences

University of Agriculture Faisalabad.

PRESENTED BY:

M. Awais TariqRegistration # 2013-ag-1062 MBA Section DInstitute of Business Management &

SciencesUniversity of Agriculture, Faisalabad.

FINANCIAL ACCOUNTING

Common Stock & Preferred Stock

Financial Statement

COMMON STOCK“Common stock possesses the traditional

right of ownership voting right, participation in dividends, and a residual claim to assets in the event of liquidation.”

PREFERRED STOCK“Preferred stock generally has a dividend

that must be paid out before dividends to common stockholders and the shares usually do not have voting rights is called preferred stock”.

DIFFERENCE

Function Voting right Redemption Kind Face value Convertibility Cumulative dividend rights Dividend

FUNCTIONS Preferred stock is designed to function

primarily as a fixed-income security. Whereas common stock is usually

considered to be a vehicle for long-term growth that often does not deliver a regular income stream.

VOTING'S RIGHT Common stock holders have a right of

voting on corporate policy. Due to their preferential treatment they

do not have the voting rights that come with common stock.

DIVIDEND Common stockholder usually receive

their dividend after preferred shareholder.

Preferred shareholders also usually receive their dividends before anything is paid to common shareholders.

CUMULATIVE DIVIDEND RIGHTS Common stock do not have cumulated

dividend rights The dividend preference carried by most

preferred stocks is a cumulative one.

CONVERTIBILITY Common stock is not convertible into

debentures. The preferred stock may be convertible

into share

FACE VALUE The face value of common stock shares

is usually low than preferred share. The face value of preferred share is

usually higher.

KIND The share has one type equity shares

now. The preferred share have two are three

types.

REDEMPTION The common share not redeemable

during the lifetime. The preferred share is redeemable

stockholder demand.

FINANCIAL STATEMENT

The principal means of reporting general purpose financial information to person outside a business organization is a set of accounting reports called financial statement. The person receiving these reports is termed the user of the financial statement.

FINANCIAL STATEMENTA set of financial statement consist of four

related accounting reports that summarize in a few pages the financial recourse, obligations, profitability and cash transactions of a business

1. Balance Sheet2. Income Statement3. Statement of Owner’s Equity4. Cash Flow Statement

BALANCE SHEET A balance sheet showing at a specific

date the financial position of the company by indicating the resource that it owns, the debt that it owes and the amount of the owner’s equity or investment in the business.

INCOME STATEMENT An income statement indicating the

profitability of the business over the preceding year or the time period.

STATEMENT OF OWNER’S EQUITY It’s explaining certain change in the

amount of the owner’s equity in the business. In business which is organized as corporation the statement of owner’s equity is replaced by the statement of retained earnings.

CASH FLOW STATEMENT A statement of cash flow summarizing

the cash receipts and cash payment of business over the same time period covered by the income statement.

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REGARDS