Share Capital & Equity
Shares, treasury stock, dividends and the equity section.
Equity is the section students meet last and understand least. Every transaction here moves money between the company and its own owners, which is why none of them ever touch the income statement — a rule this chapter returns to again and again. You start with what equity actually represents: the accounting equation solved for equity, what retained earnings is (and is not), and why issued and outstanding shares are different numbers once treasury shares exist. From there the chapter works the three transaction families in turn. Issuing shares, at nominal value and above it, including the changes that alter the number of shares without bringing in any money — bonus issues and share splits. Treasury shares, bought back and reissued above and below cost, where the gain that feels like income is credited straight to equity instead. And dividends across all three dates: declaration, record and payment. It closes with presentation — the statement of changes in equity, a standalone equity section, and full statements of financial position where the equity you have been building has to be classified correctly — then integrated cases that run a company's whole first year of equity transactions. An optional final section shows the same transactions in US GAAP terms.
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01What Equity Is
Shares, Capital & Retained Earnings: equity is what is left for the owners after every liability. Get clear on what retained earnings represents and why issued and outstanding share counts can differ.
02Issuing Shares & Changing the Share Structure
cash comes in and is split between the nominal amount and the premium above it. Bonus issues and splits change the number of shares without changing total equity at all.
03Treasury Shares
the company buying back its own shares. A reissue above cost looks like a gain, but a company can never profit from trading in its own shares, so the difference stays within equity.
04Dividends
Declaration, Record & Payment: a distribution, never an expense. Watch which of the three dates actually creates the liability, and which one only settles it.
05Presenting Equity
Changes in Equity & the Statement of Financial Position: where all of it finally appears. Work outward from the contents of the statement of changes in equity, to a standalone equity section, to full statements of financial position.
06Integrated Equity Cases
a full year of equity transactions with nothing labelled for you, then an equity event followed all the way through three statements.
07Stock Transactions under US GAAPOptional · US GAAP
for US GAAP students — common and preferred stock issues, treasury stock and cash dividends in US GAAP terms. IFRS students can skip this section.