Accounting for equity involves the systematic recording and reporting of the ownership interests in a company. Equity, also known as shareholders' equity or stockholders' equity, represents the residual interest in the assets of the company after deducting liabilities. It reflects the portion of a company's net assets that belong to its shareholders. 

Components of Equity:

Common Stock: Common stock represents the ownership interest held by shareholders in the company. Shareholders who own common stock are entitled to voting rights and may receive dividends if declared by the company's board of directors.

Preferred Stock: Preferred stock is a type of equity security that typically provides shareholders with priority in receiving dividends and liquidation proceeds over common stockholders. However, preferred shareholders generally do not have voting rights.

Additional Paid-in Capital: Also known as capital surplus or share premium, additional paid-in capital represents the amount received by the company from issuing stock in excess of its par value or stated value. It reflects the additional amount paid by investors for shares above their nominal value.

Retained Earnings: Retained earnings represent the accumulated profits of the company that have not been distributed to shareholders as dividends. It reflects the portion of net income that is retained by the company for reinvestment in operations, debt repayment, or other corporate purposes.

Accumulated Other Comprehensive Income (AOCI): AOCI includes unrealized gains or losses on certain financial instruments, foreign currency translation adjustments, pension adjustments, and other items that bypass the income statement initially but are eventually recognized in net income. It represents a subset of equity that reflects comprehensive income.

Question:

What is the component of equity that represents the accumulated profits of the company that have not been distributed to shareholders as dividends? 

 

Answer rating: 100% (QA)

Answer The component of equity that represents the accumulated profits of the company that have ... View the full answer