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Shareholders' Equity
Shareholders' equity refers to the amount of value the owners of the company have invested, either through actual investment of capital or through the retention of the businesses profits.
Contributed Capital
- The value of the assets invested in the company by its owners or shareholders in exchange for ownership (shares).
- Also called Share Capital or Common Shares
- Account balance = # of issued shares x Average issue price per share
- Increases when shares issued
- Decreases when shares are repurchased
- Typically use the account titled Common shares when recording transactions.
Retained Earnings
- Profits reinvested in the company increase retained earnings.
- Profits taken out of the company and given to shareholders are called dividends, this decreases retained earnings.
Practice: Shareholders' Equity
Choose the correct answer
Which of the following account names can be used to account for the total amount of value received by the company from its shareholders? Select all that apply.