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

Shareholders' equity consists of which of the following items?

Accounts payable, inventory, and cash

Common stock, retained earnings, and additional paid-in capital

Bonds payable, interest expense, and prepaid expenses

Revenue, cost of goods sold, and net income

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Verified step by step guidance

Understand the concept of shareholders' equity: Shareholders' equity represents the owners' claim on the assets of a company after all liabilities have been deducted. It is a key section of the balance sheet and reflects the residual interest in the company.

Identify the components of shareholders' equity: Common components include common stock, retained earnings, and additional paid-in capital. These items represent the contributions from shareholders and the accumulated profits retained in the business.

Eliminate incorrect options: Accounts payable, inventory, and cash are part of liabilities and assets, not equity. Bonds payable, interest expense, and prepaid expenses are liabilities and expenses, not equity. Revenue, cost of goods sold, and net income are part of the income statement, not the balance sheet.

Focus on the correct answer: Common stock, retained earnings, and additional paid-in capital are the correct components of shareholders' equity. These items are directly tied to the ownership and financial performance of the company.

Relate the components to the balance sheet: Common stock and additional paid-in capital are listed under the equity section as contributions from shareholders, while retained earnings represent the accumulated profits reinvested in the business.