Chapter 11 Flashcards
Reporting & Analyzing Shareholders' Equity
1
Q
Characteristics of a corporation
Which are advantages?
Which are disadvantages?
A
- Separate legal entity
- Limited shareholder liability
- Ease of transferring ownership rights (shares)
- Ability to acquire capital (cash) by issuing share
- Indefinite/unlimited/continuous life
- Separation of management and ownership
- Corporate income tax rate (lower!), rather than income being reported on personal income tax returns
- Government regulations (which increases cost and complexity)
- Increased reporting and disclosure requirements
2
Q
Who uses the Statement of Changes in Equity?
Who uses the Statement of Retained Earnings?
A
The Statement of Changes of Equity is used by public corporations reporting under IFRS accounting standards.
The Statement of Retained Earnings is used by private corporations reporting under ASPE accounting standards.
3
Q
Statement of Retained Earnings
A
A statement that summarizes the changes in the Retained Earnings account during the period, issued only by private corporations reporting using ASPE.
