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CHAPTER III
A. SUB CATEGORIES OF SHAREHOLDERS EQUITY
In dividing equity into the various categories, the accountant is
maintaining a record of the sources of shareholders equity, to distinguish
between (i) portion of shareholders equity that is contributed to the
corporation when the corporation raises funds through the sale of its shares
and (ii) portion of shareholders equity that arises from the corporations
earnings.
The categories of equity are as follows:
1. Paid in Capital
Source: contribution of assets of any kind, can be in the form of
cash, merchandise, land, buildings, equipment, patents,
copyrights, secret processes, trademarks, goodwill, shares of
other corporations, other items. The contributions purchases
made by investors who receive ownership interests and
becoming shareholders.
2. Earned Surplus (Retained Earnings)
Source: the earnings of the corporation, including not only
earnings
or
profits
from
regular
operations
but
also