Label:

After reading chapters 15 and 16 I have realized how important that every accounting student
should know, read and familiarize these contents. As every content has its own purpose and
usage in the business world. I have felt relieved and at the same time worried that I might forget
one of these contents and make a mistake.

Content:
CHAPTER 15

CORPORATION- A corporation is a legal body in which investors acquire shares of stock to

demonstrate their ownership interest.

OPERATION OF LAW- The phrase "by operation of law" is a legal word that suggests that a
right or responsibility has been generated for a company, regardless of that company's desire,
since existing legal principles mandate it.

ARTICLES OF INCORPORATION- Articles of incorporation are a series of formal documents

that must be filed with a government agency in order to legally establish the formation of a
business. Articles of incorporation often include details such as the firm's name, street location,
agent for service of process, and the amount and kind of stock to be issued.

SHAREHOLDERS’ EQUITY- Shareholder equity corresponds to a firm's net value or the entire
monetary amount that would be given to shareholders if the company were liquidated after all
debts were paid off.

MEMORANDUM METHOD- A memorandum entry is a brief note that is recorded into the
general journal as well as a general ledger account. As it lacks debit and credit balances, it is
not a complete journal entry.

JOURNAL ENTRY METHOD- An accounting journal entry is the mechanism of recording an

accounting transaction in a company's accounting records. Accounting data are consolidated
into the general ledger, or journal entries may be kept in a number of sub-ledgers before being
rolled up into the main ledger.

AUTHORIZED SHARE CAPITAL- In the widest sense, approved share capital refers to a
company's capital. It refers to all of the shares that the firm may issue if it wished to or if it were
required. The authorized share capital is determined by the shareholders of the firm and may
only be increased with their permission.

UNISSUED SHARE CAPITAL- Unissued stock is a type of corporate share that is not circulating
or for purchase on the market by the firm. Subtracting the outstanding shares + treasury stock
shares from the total number of permitted shares yields the amount of unissued shares.
SUBSCRIPTION- A subscription is a contract in which products, services, or shares are sold on
a regular basis rather than individually. If your company sells subscriptions, you may automate
your billing process by using recurring invoices.

SUBSCRIPTION RECEIVABLE- The phrase subscribed stock refers to ordinary and preferred
shares that are offered to investors and employees in installments over time. When an
employee or investor agrees to acquire shares of stock on a subscription basis, the corporation
will issue shares after the sum outstanding is paid in full.

SUBSCRIBED SHARE CAPITAL- Subscribed shares are those that shareholders have agreed
to purchase. These shares are often purchased as part of an initial public offering (IPO) (IPO).

SHARE DIVIDENDS DISTRIBUTABLE- A common stock dividend distributable is a dividend

proclaimed by a company's board of directors yet to be paid to common stockholders.

SHARE CAPITAL- The word "share capital" signifies the amount of capital invested in a firm by
its owners, as signified by common and/or preferred shares.

SHARE CERTIFICATE- A share certificate is a formal document signed on behalf of a company

that acts as legal evidence of the ownership of the specified number of shares. A stock
certificate is another name for a share certificate.

ORDINARY SHARE CAPITAL- The amount of money raised by a corporation from private and
public sources via the issuance of common shares is referred to as its ordinary share capital.
It is the capital received by the company's owners in return for shares.

PREFERENCE SHARE CAPITAL- Preference shares, also known as preferred stock, are
shares of a company's stock that pay dividends to stockholders before common stock payments
are paid out.

SHARE PREMIUM- A balance sheet entry for a share premium account is common. This
account is credited for money paid or pledged to be paid for a share by a shareholder, but only
when the shareholder pays more than the share's cost.

PAR VALUE- The par value of a single common share is determined by the charter of a
corporation. It is not usually tied to the real share value. In reality, it is frequently lower. The par
value is shown on each stock certificate issued for acquired shares. When approving shares, a
firm can choose whether or not to give a par value.

NO-PAR VALUE- No par value stock refers to shares that were issued without a par value
mentioned on the stock certificate. Historically, par value was the price at which a company's
shares were first offered.
LEGAL CAPITAL- Legal capital is the portion of a firm's stock that is not legally permitted to
leave the company; it cannot be transferred through dividends or other ways.

SHARE ISSUANCE COST- Stock issuance costs are the charges incurred by a business when
it issues securities to the market in financial accounting. Fees for attorneys, accountants, and
underwriters are typical expenditures connected with issuing shares.

TREASURY SHARES/ STOCKS- Treasury stock, also known as treasury shares or reacquired
stock, is previously outstanding stock that the issuing corporation buys back from investors.
As a result, the total number of outstanding shares on the open market falls.

COST METHOD- Certain investments are recorded in a company's financial statements using
the cost method of accounting. When the investor has little or no control over the investment
that it holds, which is commonly represented as holding less than 20% of the firm, this strategy
is employed.

RETIREMENT OF SHARES- A company's repurchased and canceled shares are known as

retired shares. They have no monetary worth and have no ownership in the firm.

DONATED CAPITAL- Donated capital refers to assets provided as a gift to an entity.

This sum is recorded at the fair market value on the date the gift was received.

CHAPTER 16

RETAINED EARNINGS- Retained earnings are the profits left over after a corporation has paid
all of its direct and indirect costs, income taxes, and dividends to shareholders.

UNRESTRICTED- Unrestricted cash or cash and cash equivalents are funds that an
organization can spend today, indicating that the funds are easily available—or liquid.

APPROPRIATED- Appropriation is the act of allocating funds for a certain purpose.

In accounting, it refers to a breakdown of how a company's earnings are distributed, or in
government, it refers to an account that indicates the monies that a government agency has
been credited with.

NEGATIVE BALANCE- A negative balance indicates that an improper accounting transaction

has been recorded in an account and should be examined. It usually signifies that the debits
and credits were inadvertently reversed, or that the incorrect account was utilized as part of a
journal entry.
DEFICIT- A deficit arises when costs exceed income, imports outweigh exports, or liabilities
exceed assets in financial terms. A deficit is the inverse of a surplus and is identical with a
shortfall or loss.

CAPITAL DEFICIENCY- A capital account deficit happens when a company's equity becomes
negative. This signifies that the overall value of the obligations surpasses the total value of the
assets.

DIVIDENDS- Dividends are a type of income that corporate owners get for each share of stock
that they own. These payments are made in cash or other assets from a corporation's profits or
accrued retained earnings.

CASH DIVIDENDS- A cash dividend is a distribution of funds or money made to investors from
the corporation's current earnings or accumulated profits. Cash dividends are paid directly in
cash as opposed to stock dividends or other forms of value.

PROPERTY DIVIDENDS- A property dividend is a dividend provided to investors in the form of

property rather than cash. A firm, for example, may deliver its own products to investors as a
dividend.

SHARE DIVIDENDS/ STOCK DIVIDENDS- A stock dividend is a dividend payment delivered to

shareholders in the form of stock rather than cash. The stock dividend provides the benefit of
paying shareholders while without depleting the company's cash reserves. These stock
distributions are often provided in the form of fractions paid per existing share.

DATE OF DECLARATION- The declaration date is the day on which a company's board of
directors announces the next dividend payment. This statement specifies the size of the
dividend, the ex-dividend date, and the payment date.

DATE OF RECORD- The date of record is a future date on which the board of directors
determines when to issue dividends. A dividend will be paid to all shareholders on the record
date.

DATE OF DISTRIBUTION- A distribution is a payment made by a firm to its shareholders in the

form of cash, shares, or a tangible object. Distributions are capital and revenue allocations
made throughout the calendar year.

PREFERENCE SHARES- Preference shares, also known as preferred stock, are shares of a
company's stock that pay dividends to stockholders before common stock payments are paid
out.

LIQUIDATION VALUE- The value of a company when its assets are sold is referred to as its
liquidation value. In other words, the liquidation value is the expected amount of money
collected after the company's assets are liquidated and its obligations are paid. This value is
frequently expressed per share.

PREFERENCE OVER DIVIDENDS- A preferred dividend is a dividend that is assigned to and

paid on preferred shares of a firm. If a firm is unable to pay all dividends, claims to preferred
dividends take precedence over claims to common share payments.

NONCUMULATIVE PREFERENCE SHARE- Noncumulative preference shares are those that

pay a predetermined dividend amount from the company's net profit each year to the
shareholder.

CUMULATIVE PREFERENCE SHARE- Cumulative preferred stock is a form of preference

share with a clause requiring a corporation to pay all dividends, including previously missed
payouts, to cumulative preferred shareholders.

NONPARTICIPATING PREFERENCE- Non-participating preferred stock is preferred stock that

restricts the amount of dividends paid to its shareholders. This typically implies that a certain
dividend % is listed on the face of the stock certificate.

PARTICIPATING PREFERENCE- Participating preferred stock is similar to preferred shares in

that its stockholders get both preferred dividends and an extra dividend.

LIQUIDATING DIVIDENDS- A liquidation dividend is a payout of cash or other assets to

shareholders, with the goal of closing down a corporation.

SHARE SPLIT- When a business turns its shares into a multiple of its shares, this is referred to
as a stock split. This raises the total number of shares outstanding by issuing more shares to
current shareholders.

SPLIT UP- A split-up is a financial phrase that refers to a business action in which a single
company is divided into two or more distinct, independently operated entities.

SPILT DOWN- A split-off is a technique of corporate reorganization in which a parent firm

divests a business unit under certain set conditions.

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v
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