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Statement of Retained Earnings (Can be modified into Statement of…
Statement of Retained Earnings
Initial Retained Earnings + Net Income - Dividends = Ending Retained Earnings
Net Income comes from
Income Statement
Ending Retained Earnings goes onto
Balance Sheet
Income Statement (Net Profit) -> Statement of Retained Earnings (Ending Retained Earnings) -> Balance Sheet (Stockholder's Equity)
Formatting
Header
:
Name
Statement of Retained Earnings
For
period
ended
date
Units
Initial Retained Earnings
+Net Income
-Dividends Payable
Ending Retained Earnings
Single line before Ending Retained Earnings
Ending Retained Earnings + Contributed Capital = Stockholder's Equity
Over a
period
of time
Can be modified into Statement of Stockholder's Equity by adding Contributed Capital:
Ending Retained Earnings + Contributed Capital = Stockholder's Equity
Contributed Capital is split into Par Value and Additional Paid in Capital
Further split by common vs preferred stock
Preferred pays BEFORE common
To calculate part value and additional paid in capital, only consider the SOLD shares * selling price or par price
How to Account for Issuing Stocks
Debit Cash by total shares * sell price
Credit Par Value by # shares * par value
Credit additional paid in capital by difference
Types of Shares
Issued
Outstanding
(owned by public)
Treasury
(repurchased by company)
How to Account for Repurchasing Shares (Treasury)
Treasury Stocks are a CONTRA EQUITY account
Credit Cash, Debit Treasury Stock (+XE, -Stockholder's Equity)
How to Account for Reissuing Treasury Stocks
Debit Cash by # shares * reissue price
Credit treasury stock by # shares * REPURCHASE price of treasury stock
Credit capital in excess of par value (+Stockholder's Equity) by # shares * the difference between reissue and repurchase price
Unissued
Stock Splits? Don't change the total par value...but they reduce individual par value and increase number of shares
Dividends
How to account for paying dividends
Declaring
Credit Dividends Payable by # Shares * Dividend Price
Debit Retained Earnings by same amount
Payout
Debit Dividends Payable
Credit Cash
ONLY FOR PREFERRED STOCKS: Current vs. Cumulative
Cumulative gets all dividends (including those unpaid before) before current
To find dividend price:
Preferred = Stated percent x PAR value x number of shares
Remember to add in any past year's unpaid stocks for cumulative
Common = Total dividends - (preferred stocks)
RATIOS
EPS
= Net Income / Average Shares Outstanding
Dividend Yield
= Dividends per Share / Market Price per share