Book Value of Equity Formula

The book value of equity represents the amount of a business which is available for the distribution to the stockholders. The total book value of equity needs to be allocated to preferred stockholders before common stockholders.

Last modified April 9th, 2020 by Michael Brown
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No Par Stock Journal Entry in Accounting

Shares of stock in a business are often issued with a par or nominal face value such as 0.001 per share. In certain jurisdictions no par stock can also be issued in which case proceeds received from the issue are credited to the capital stock account.

Last modified July 17th, 2019 by Michael Brown
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Stock Option Compensation Accounting

Stock options are a form of equity based compensation. When a business purchases the services of key personnel and pays for those services using stock options, it must record the expense in the income statement over the vesting period using stock based compensation accounting journal entries.

Last modified October 27th, 2022 by Michael Brown
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Preferred Stock Equity

What is preferred stock ? Preferred stock is a type of equity which gives stockholders additional benefits (preferences). The main benefit is that the preference stockholders are entitled to dividends and repayment of their investment on liquidation before any payments are made to common stockholders.

Last modified January 7th, 2020 by Michael Brown
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Preferred Stock Journal Entries

The preferred stock journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of preferred stock transactions.

In each case the journal entries show the debit and credit account together with a brief narrative.

Last modified November 12th, 2019 by Michael Brown
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How to Value a Stock

The present value of a growing perpetuity formula is used to calculate the present value of a series of periodic payments which increase at a constant rate each period. The formula can be used as the basis for the Gordon growth model when considering how to value shares and stocks.

Last modified November 20th, 2019 by Michael Brown
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Stock Split Accounting

A stock split is used to reduce the market price of the capital stock of a business in order to make it more attractive to investors, and increase demand.

Last modified March 8th, 2023 by Michael Brown
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Non-Cash Capital Introduction

It is often the case, particularly with a start up business, that there will be a non-cash capital introduction in which the business will issue equity in return for non-cash assets such as property, plant, and equipment or supplies and inventory.

Last modified November 21st, 2019 by Michael Brown
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Dividends Declared Journal Entry

When a business declares a dividend part of the retained earnings of the business are distributed to the owners. The impact on the accounting equation is to increase the dividends payable liability and decrease the owners equity is the business.

Last modified August 3rd, 2020 by Michael Brown
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Capital Stock Accounting

For a business which is operated through a company or corporation, the equity is referred to as shareholders’ equity and the capital introduced is referred to as capital stock or share capital, and represents ownership in the company or corporation. This ownership also gives the stockholder a right to a share in the retained earnings of the business.

Last modified February 14th, 2020 by Michael Brown
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