In this lesson, Nick Palazzolo, CPA, unravels the complexities of stockholders' equity by breaking down its essential components. He delves into the nuances of capital stock, additional paid-in capital (APIC), and retained earnings, illuminating the significance of par value and how APIC tracks the internally generated gains of a company. Clarifying concepts often glossed over in education, Nick demonstrates how net income and dividends directly impact retained earnings, visualized as a company's net income "bank account." He further elucidates the process by going over journal entries for dividend payouts and the year-end adjustment for net income, providing a clearer understanding of the ways these equity elements reflect a company's financial health on the balance sheet.
Lesson: Stockholders Equity Components
In this lesson, Nick Palazzolo, CPA, unravels the complexities of stockholders' equity by breaking down its essential components. He delves into the nuances of capital stock, additional paid-in capital (APIC), and retained earnings, illuminating the significance of par value and how APIC tracks the internally generated gains of a company. Clarifying concepts often glossed over in education, Nick demonstrates how net income and dividends directly impact retained earnings, visualized as a company's net income "bank account." He further elucidates the process by going over journal entries for dividend payouts and the year-end adjustment for net income, providing a clearer understanding of the ways these equity elements reflect a company's financial health on the balance sheet.
Updated: Oct. 20, 2021 Create an account