1Nature of a corporation (499)

“A corporation is an artificial being, invisible, intangible, and existing only in

contemplation of the law”

2Characteristics of corporations (499)

Corporation may buy, own and sell or give away property in its own name like people
can.
Owners of a corporation are called stockholders or shareholders because they own shares
or stocks of a corporation.
Stockholders have limited liability

3Types of Corporations (499)

Public corporations – corporations whose shares are sold to the public
Private (non public) corporations – corporations whose shares are owned by a small
group of investors

4Organization of corporations (500)

Stockholders elect a board of directors who select CEO’s who hire employees to work for
the corporation.
The board distributes funds earned to shareholders
Since a corporation is a separate entity, like people, they are required to pay all the taxes
that are required of us.

5Stockholder’s equity (501)

Stockholder’s equity replaces owner’s equity because the stockholders are the owners; it
is also referred to as shareholder’s equity, shareholder’s investment, or capital.
Two sources of capital are the paid-in capital or contributed capital which is given by
shareholders and other investors, and the second is retained earnings.

Stockholder’s equity .
Paid-in capital
Common Stock $330,000
Retained Earnings 80,000
Total stockholder’s equity $410,000

6Capital (502 top)

Paid-in capital is recorded in a separate account for stock. If there is only once class of
stock, it is called Common Stock, or Capital Stock
The retained earnings are the same as net income or net loss. When a coration suffers
from a net loss it is called a deficit.
In the stockholder’s equity section, the deficit is subtracted from paid-in capital to
determine total stockholder’s equity.

7Paid-in capital (502-508)

Stock involves the amount of shares a corporation can issue to shareholders. When it is
in the hands of the shareholders it is called outstanding stock.
8Reporting paid- in capital (509)
Illustration on 509

9Accounting for dividends (510-514)

Cash dividends - explain
Stock dividends - explain
Liquidating dividends - explain

10Retained earnings statement (516)

Definition in book and illustration

11Combined income and retained earnings statement (516-517 top)

Definition in book before and after illustration and illustration

12Statement of stockholder’s equity (517)

Definition and illustration from book

13Unusual items that afect the income statement (540-541)

Discontinued operations
Extraordinary items of loss or gain
Change from one GAAP to another

14Discontinued operations (541-542 top)

Summary of provided info

15Extraordinary itmms of loss or gain (542)

Summary of provided info

16Change in GAAP (542)

Summary of provided info

17Business Combinations (553-554)

Mergers and consolidations
Parent and subsidiary corporations

18Mergers and consolidations (553)

Summary of provided info

19Parent and subsidiary corporations (553-554 top)

Summary of provided info

20Financing Corporations (573)

Paragraph 1 and 2 summarized

21BONDS (list of issues concerning bonds to be discussed)

Bonds definition – on this slide
Characteristics of bonds payable
Bond sinking funds
Bond redemption
Investment in bonds

22characteristics of bonds payable (574-575)

Summary of bonds payable

23Bond sinking funds (582)

Summary of information given

24Bond redemption (582-583)

Summary of information given

25Investment in bonds (583-585)

Summary of provided information

26Corporation Balance Sheet (585-587)

Summary of paragraphs and illustration

27Purpose of Statement of cash flows (606)

info given in book

28Reporting Cash Flows (607)

Summary of info in book

29Cash flows (607 bottom-608)

From operating activities
From Investing Activities
From Financing Activities

30Statement of cash flows direct method (619-624)

Illustrations and definitions and summary of information on pages 619-624