Accounting Demystified

Chapter 16. Stockholders' Equity

The stockholders' equity section contains the capital contributed by the owners (also called shareholders or stockholders) and the earnings retained by the business (this account is called Retained earnings). On the Balance Sheet, the stockholders' equity section is divided into Contributed capital (capital put in by the owners) and Retained earnings. The contributed capital section contains an entry for each of the different types of stock the company has issued. Larger companies often issue two types of stock, common stock and preferred stock. Smaller companies will usually issue only common stock. In addition, there can be different types of common and preferred stock issued, with each type having unique privileges ...