The Corpotate Form Of Organization There are three primary form of bussines organization-the propriertoship, partnership, and corporation.

And there are special charateristhic of corporate from affect accounting, include : 1. Influence of corporate law 2. Use of the share system 3. Development of a variety of ownership interests Corporate Law Corporation must submit articles of incorporation to the appropriate governmental agency for the country in which incorporation is desired. Example, General Motors - incorporated in Delaware and U.S. Steel - incorporated in New Jersey. Many goverments have their own bussines incoporation act, the accounting for equity follows the provisioms of these acts. As a results, terms often mean one thing in one country and another thing in different country Share System Equity in a corporation geenerally consista large number of units. Within a given clas of shares, each shares excatly equals every other share. In the absence of restrictive provisions, each share carries the following rights: 1. To share proportionately in profits and losses. 2. To share proportionately in management (the right to vote for directors). 3. To share proportionately in assets upon liquidation. 4. To share proportionately in any new issues of shares of the same classcalled the preemptive right. Variety of Ownership Interests In every corporation, one class of shares must represent the basic ownership interest. That Class of shares is collected ordinary. In Ordinary shares represent the residual corporate interest. Bears ultimate risks of loss. Receives the benefits of success. A common type of preference is to give preference shareholders a prior claim on earnnings. The corporation thus assures them a divided, ussualy started rate, before its distirbuted any amount to the ordinary shareholders. So it Not guaranteed dividends nor assets upon dissolution

Presentation and Analysis of Equity

Presentation of Equity

Presentation of Statement of Changes in Equity

Analysis : Illustration: Gerbers Inc. had net income of $360,000, declared and paid preference dividends of $54,000, and average ordinary shareholders equity of $2,550,000.

Ratio shows how many dollars of net income the company earned for each dollar invested by the owners.

Illustration: Troy Co. has cash dividends of $100,000 and net income of $500,000, and no preference shares outstanding.

It is important to some investors that the payout be sufficiently high to provide a good yield on the share. Illustration: Troy Co. has cash dividends of $100,000 and net income of $500,000, and no preference shares outstanding.

Amount each share would receive if the company were liquidated on the basis of amounts reported on the balance sheet.