Under GAAP, which stands for Generally Accepted Accounting Principles, companies have specific rules for reporting stockholders' equity. Here’s a simple breakdown of those requirements:
Parts of Equity: Companies need to show different types of stock separately. This includes:
How to Present It: The Statement of Stockholders' Equity usually shows changes over a certain time. This helps show if there were increases or decreases from things like issuing new stock or paying out dividends.
Important Information: Companies also have to share their policies about dividends. This includes how dividends affect retained earnings.
For example, if a company sells $10,000 worth of common stock, that amount would increase both the common stock and additional paid-in capital. This shows that the company’s equity is growing.
Under GAAP, which stands for Generally Accepted Accounting Principles, companies have specific rules for reporting stockholders' equity. Here’s a simple breakdown of those requirements:
Parts of Equity: Companies need to show different types of stock separately. This includes:
How to Present It: The Statement of Stockholders' Equity usually shows changes over a certain time. This helps show if there were increases or decreases from things like issuing new stock or paying out dividends.
Important Information: Companies also have to share their policies about dividends. This includes how dividends affect retained earnings.
For example, if a company sells $10,000 worth of common stock, that amount would increase both the common stock and additional paid-in capital. This shows that the company’s equity is growing.