Presentation on

Company Formation, Dividend &

Retained Earnings
Course Name: Intermediate Accounting
Course Code: ACC-2302
 Our Team

Kamrul Hasan Wasik Khan Mahmudul Kabir

ID: 1029 ID: 1020 ID: 1025

Sadia Afrin Ayesha Akter Fatema Rahman

ID: 1002 ID: 1036 ID: 1033
CONTENT
S 01 COMPANY & ITS
CLASSIFICATION 04 COMPANY IS AN ARTIFICIAL
BEING

02 AUTHORIZED AND PAID-UP

CAPITAL 05 RETAINED EARNINGS,
DIVIDEND AND ITS TYPES.

03 JOURNAL FOR ISSUING

SHARES IN CASH 06 DATES RELATED TO
DIVIDEND & JOURNAL
 Definition
° The term Company is used to describe
an association of a under of persons,
formed for some common purpose and
registered.
° It is an artificial entity formed under
the guideline of law to serve any
business purpose. It is a body
corporate.

Example: Coca-Cola Limited

 Characteristics of
Company

01 02 03 04 05
Voluntary Artificial Invested by Perpetual Single,
Association Legal one or more Succession Joint,
Entity individual Partnership

06 07 08 09
Limited Transferable Run by own Separate
by Share seal & Name ownership
shares from management
 Company is an
Artificial Being
An incorporated company is a legal entity or existence separate
or distinct from its owners.

Investors Company Shareholders

What is a separate legal entity?

A separate legal entity is a “legal person” recognised

by law.
Characteristics It can buy, sell, and own any
01. type of property under its own
name.

It can enter into contracts &

02. engage im legal activities

independently of their
shareholders.

03.
Sue in its own name and be
Shareholders sued in its own name.
C or p Company
orate
Veil
Mr. Salomon
Shareholders of
had a leather merchant & manufacturer Company
business. He converted his business • Mr. Salomon
into a limited company • Mrs. Salomon
• 1 Daughter
• 4 Sons
Salomon & Co. Ltd.
Company Went into Liquidation The house of the lord ruled and
established the principle that
company is a separate legal entity.
What is Dividend?
A dividend is generally considered to be a cash payment issued to
the holders of company stock.

Types of Dividend
1. Cash dividend
2. Property dividend
3. Stock dividend
4. Scrip dividend
 THREE IMPORTANT DATES
Date of Declaration Date of Declaration
Record payment
Record Liability of cash to
for dividend Date of Record stockholder

No entry
required
 EXAMPLE
On January 9, a $1 per share cash dividend is declared on Z-Tech Inc.'s 5000
common share outstanding. The dividend will be paid on February 1 to
stockholders of record on January 22.

Record Liability for Record payment of cash

Dividend to stockholder
Date Particular Dr. Cr. Date Particular Dr. Cr.

Jan-9 Retained Earning 5000 Feb-1 Common Dividend Payable 5000

Common Dividend payable 5000 Cash 5000


Stock Dividend
A distribution of a
corporation's own shares to
it's stockholders without
receiving any payment in
return
Small stock dividend
Distribution is ≤25% of the
previously outstanding
shares.
Why corporation's issues stock dividends?
• can be used to keep the market
price in the sotck holders.
• can provide evidence of
management's confidence that the
company is doing well.
Large stock dividend
Distribution is >25% of the
previously outstanding
shares.
 Authorized and
paid-up capital

Authorized Capital Paid-up Capital

• Definition • Definition
• Significance • Significance
• Process • Calculation
 Journal entry for issuing
shares in cash

Introduction
• Issuing shares in cash is a common practice for
companies looking to raise capital.
• This process involves selling ownership in the
company to investors in exchange for cash.
 JOURNAL

Debit
• Cash (for the amount received from investors)

Credit
• Common Stock (for the par value of the shares issued)

Credit
• Additional Paid-in Capital (for the excess of the cash received
over the par value).
 EXAMPLE
Let's consider an example of a company issuing 1,000 shares at $10 per share
with a par value of $5 per share.

Date Particular Dr. Cr.

Jan-4 Cash 10,000

Capital - Common Stock 5,000

Additional Paid in Capital 5,000

 KEY DATES & JOURNAL ENTRIES
IN DIVIDEND DISTRIBUTION

Declaration Date
Definition: The declaration date is when a company's board of directors formally
announces its intention to pay a dividend.

Significance: Marks the commitment to distribute dividends, impacting investor

expectations and influencing stock prices.

Journal Entry:
Debit: Retained Earnings (or Dividends Payable)
Credit: Dividends Declared (Liability)

Importance: Investors use this information to anticipate future income and make
investment decisions.
 KEY DATES & JOURNAL ENTRIES
IN DIVIDEND DISTRIBUTION

Ex-Dividend Date
Definition: The ex-dividend date is the first day a stock trades without the dividend,
determining eligibility for the upcoming payout.

Significance: Investors must buy the stock before this date to qualify for the dividend,
affecting trading behavior and stock prices.

Journal Entry: No specific entry on the ex-dividend date; it is primarily a marker for
investor eligibility.

Importance: Crucial for investors to time their stock purchases to receive dividend
payouts.
 KEY DATES & JOURNAL ENTRIES
IN DIVIDEND DISTRIBUTION

Payment Date
Definition: The payment date is when the actual dividend payments are distributed to
shareholders.

Significance: Represents the culmination of the dividend process, providing

shareholders with tangible returns on their investment.

Journal Entry:
Debit: Dividends Payable
Credit: Cash (or Dividend Expense)

Importance: Finalizes the financial transaction and fulfills the company's commitment to
shareholders.