Accounting Chapter 13

Corporation

A business organized under state law that is a separate legal entity.

Treasury Stock

A corporation's own stock that it has previously issued and later reacquired.

Dividend

A distribution of a corporation's earnings to stockholders.

Underwriter

A firm that handles the issuance of a company's stock to the public, usually assuming some of the risk by agreeing to buy the stock if the firm cannot sell all of the stock to its clients.

Large Stock Dividend

A stock dividend greater than 20% to 25% of the issued and outstanding stock.

Small Stock Dividend

A stock dividend of less than 20% to 25% of the issued and outstanding stock.

Earnings per Share (EPS)

Amount of a company's net income (loss) for each share of its outstanding common stock. = (Net Income - Preferred Dividends) / Weighted average number of common shares outstanding

Par Value

An amount assigned by a company to a share of its stock.

Dividend in Arrears

If the cumulative dividend of a preferred stock has not been paid for the year.

Deficit

Debit balance in the Retained Earnings account.

Outstanding Stock

Issued stock in the hands of stockholders.

Paid-in Capital

Represents amounts received from stockholders of a corporation in exchange for stock.

Authorized Stock

The maximum number of shares of stock that the corporate charter allows the corporation to issue.

Legal Capital

The portion of stockholders' equity that cannot be used for dividends.

Issue Price

The price the stock initially sells for the first time it is sold.

Stockholder's Equity

A corporation's owners' equity that includes paid-in capital and retained earnings.

Prior-Period Adjustment

A correction to Retained Earnings for an error of an earlier period.

Stock Dividend

A distribution by a corporation of its own stock to its stockholders.

Memorandum Entry

An entry in the journal that notes a significant event, but has no debit or credit amount.

Stock Split

An increase in the number of issued and outstanding shares of stock coupled with a proportionate reduction in the par value of the stock.

Retained Earnings

Capital earned by profitable operations of a corporation that is not distributed to stockholders.

Stated Value Stock

No-par stock that has been assigned amount similar to par value. Represents the minimum amount that the corporation can issue the stock for.

Stock Certificate

Paper evidence of ownership in a corporation ; issued to stockholders when they buy the stock.

Noncumulative Preferred Stock

Preferred stock whose owners do not receive passed dividends. Corporation isn't required to pay passed dividends.

Cumulative Preferred Stock

Preferred stock whose owners must receive all dividends in arrears plus the current year dividend before the corporation pays dividends to the common stockholders.

Paid-In Capital in Excess of Par

Represents amounts received from stockholders in excess of par value. Shown as an equity account on the balance sheet.

Common Stock

Represents the basic ownership of a corporation.

Capital Stock

Represents the individual's ownership of the corporation's capital.

Appropriation of Retained Earnings

Restriction of a portion of retained earnings that is recorded by a journal entry.

Rate of Return on Common Stockholders' Equity

Shows the relationship between net income available to common stockholders and their average common equity invested in the company. = (Net Income - Preferred Dividends) / Average Common Stockholders' Equity

Preferred Stock

Stock that gives its owner's certain advantages over common stockholders, such as the right to receive dividends before the common stockholders and the right to receive assets before the common stockholders if the corporations liquidates.

Issued Stock

Stock that has been issued but may or may not be held by stockholders.

No-Par Stock

Stock that has no amount (par) assigned to it.

Preemptive Right

Stockholder's right to maintain his or her proportionate ownership in the corporation.

Premium

The amount above par at which a stock is issued.

Discount

The amount below par at which a stock is issued.

Price/Earnings Ratio

The ratio of the market price of a share of common stock to the company's earnings per share. Measures the value that the stock market places on $1 of a company's earnings. = Market Price Per Share of Common Stock / Earnings per Share