Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

Stockholders' equity consists of which of the following?

Cash and accounts receivable

Accounts payable and notes payable

Common stock and retained earnings

Inventory and prepaid expenses

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Verified step by step guidance

Understand the concept of stockholders' equity: Stockholders' equity represents the owners' claim to the assets of a corporation after all liabilities have been deducted. It is a key component of the balance sheet and reflects the residual interest in the company.

Identify the components of stockholders' equity: Stockholders' equity typically includes common stock, preferred stock (if applicable), additional paid-in capital, retained earnings, and sometimes treasury stock (which is subtracted). These items represent the ownership interest in the company.

Eliminate incorrect options: Cash and accounts receivable are classified as current assets, not stockholders' equity. Accounts payable and notes payable are liabilities, not equity. Inventory and prepaid expenses are also assets, not equity.

Focus on the correct components: Common stock represents the ownership shares issued by the company, and retained earnings represent the accumulated profits that have been reinvested in the business rather than distributed as dividends.

Conclude that stockholders' equity consists of common stock and retained earnings, as these are the correct components based on the definition and classification of equity in financial accounting.