08/04/2022

Audit of Shareholder’s Equity

*stockholder’s – in case of corporation

Changes in Owner’s Equity

1. New stock issues – authorized shared by SEC to be issued; to be classified as ordinary or preferred share,
2. Purchase/reissuanceTreasury Shares – buyback originally issued shares as long as not cancelled and not retired
3. Prior period adjustments – retained earnings; an example is changes in accounting policy that we would be needing
retrospective effect/adjustment that can be seen in the beginning of earliest period, that would soon take effect to
RETAINED EARNINGS.
4. Dividend payment and declaration – dividend can be cash/noncash, stock declaration – stock dividend

Additional Notes – Audit of SHE

Authorized share capital is the maximum amount of capital that a company can issue to stakeholders as agreed
in its articles of association.

Outstanding share is the total number of shares issued by a company except for those held in its treasury.
Outstanding shares include restricted shares held by insiders that are not immediately available for trading.

Cumulative preferred stock is a class of stock that where undeclared dividends are allowed to accumulate until they
are paid.

Noncumulative preferred stock describes a type of preferred stock that does not pay stockholders any unpaid or
omitted dividends.

Participating preferred stock is a type of preferred stock that gives the holder the right to receive dividends equal to
the customarily specified rate that preferred dividends are paid to preferred shareholders, as well as an additional dividend
based on some predetermined condition.

Non-participating preferred stock is preferred stock that specifically limits the amount of dividends paid to its
holders.

Additional Notes – Audit of SHE

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Additional Notes – Audit of SHE

Rule in Treasury Share and Unappropriated Retained Earnings

- Re-acquisition of share/stock is allowed if there is enough

unappropriated retained earnings. Otherwise, this will violate the
TRUST FUND DOCTRINE.

Additional Notes – Audit of SHE

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Additional Notes – Audit of SHE

Subscribed Share Capital

It is the portion of the issued capital for which the corporation has
received an application.

Additional Notes – Audit of SHE