Accounting for Equity

UNDERSTANDING EQUITY

          Equity is the magnitude of the interests / rights of the owner of the company on company property. If we recall the basic accounting equation, the left side is the right side is a treasure and debt and equity. The left side is a resource controlled by the company, while the right side shows the magnitude of the interests of creditors and the owners of the company property. The magnitude of the interests of the owner of the property called the company's equity.

FORM COMPANY

          There are several companies that form a sole proprietorship, partnership and limited liability companies and co-operatives. Although individual companies are not legally recognized as a separate entity with its owner, but the view of the company's accounting separate from the individual owners. Limited liability company is a legal entity according to the view that humans can perform such activities so that it can be said that PT is an artificial entity (artificial entity). In this module pembahsan emphasized the limited liability company.

CHARACTERISTICS OF THE COMPANY LIMITED

          If viewed from the standpoint of accounting PT is a company whose shares realized by ownership. Stock is a certificate issued by the company. A person or institution who participated submit resources (wealth) will be awarded to the company's stock. They are called shareholders.

TYPES OF STOCK

          Company's common stock issued and sometimes preferred shares. Preferred shares has advantages over the ordinary shares, for example in the distribution of dividends or in the event of liquidation. Dividend is a distribution to shareholders something. Because it has slightly different characteristics, accounting is usually split between shares of common stock with priority / preference.

ISSUANCE OF SHARES

          Because of the process of issuing the shares of stock status can vary as follows:

1. Shares that have been authorized
2. Has been ordered but not yet delivered to buyers
3. Which has sold circulating submitted to the shareholders
4. Bought back and retained by the company
5. Canceled

SALE OF SHARES IN CASH

          If viewed from the set value of a stock, there are three types of shares, namely: (1) shares with a nominal value, the nominal value of going to stocks written. (2) Shares with a value set, in a letter written no par value shares, but the company set its value. (3) Shares of no par value and set value.

1. Shares with a nominal value

          To hem the nominal value or niali specified, the same accounting share capital account will be credited for the face value or the value set. If there is a difference between the set value / nominal with the money earned, the excess is recorded as a discount (if the stock price <par value shares) or premium if otherwise.

2. Shares without par value

          For shares without par value / set, the share capital account will be credited for the money received

 

SALE OF SHARES BY NON-CASH ASSET exchanged

          If the company's shares issued as consideration for the acquisition of non-cash assets such as fixed assets, the exchange will be recorded at the market price of the stock or the market price of the acquired fixed assets which are more reliable

SALE OF SHARES WITH PAYMENT IN STAGES

          If the shares are sold with phased payments or orders, new stock should be submitted after the share price paid by the buyer shares. At the time the company received an order stock, the company will record the share subscription receivable and accounts receivable if received ung credited. Once paid, the stock delivered to the buyer.

THE SHARES OF COMMON STOCK DIVIDENDS Preferred Stock

          If the company has decided to pay dividends and outstanding shares consisting of common stock and preferred stock, the dividend should be allocated to the holders of common stock and preferred stock.
          There are non-cumulative preferred stock. Preferred stock is non-cumulative preferred shares if dividends are not paid for one year, then the amount of the dividend is not payable in subsequent years.

LIMITATION OF RETAINED EARNINGS

          Large retained earnings can be used as a basis for paying dividends. Sometimes for a particular purpose is limited to retained earnings divided ridak in the form of dividends. This restriction is done for several purposes such as protecting creditors if the company buys back shares of the company. Purchase its own shares substantially similar to return the money to the owner. Due to the company's interest in the property is the owner's creditors and, if the company returns the money to the owners, creditors will be threatened its interests. Therefore dividends substantially reversion to the owner needs to be restricted by binding (limiting) retained earnings.