Archive | Equity

Purpose of Statement of Changes in Equity | Accounting

This statement is meant for displaying the movement in equity during the accounting period. Examples equity components are: i. Equity share capital. ii. Retained earnings: This an account of undistributed profit presented in the Statement of Income in earlier accounting years and profit during the year other than the portions which are set aside under […]

4 Important Characteristics of Equity

Financial Accounting Standards Board (FASB) has listed the following characteristics of equity: 1. Equity in a business enterprise stems from ownership rights. It involves a relation between an enterprise and its owners as owners rather than as employees, suppliers, customers, lenders or in some other non-owner role. Since it ranks after liabilities as a claim […]

Top 5 Theories of Equity

The following points highlight the top five theories of equity. The theories are: 1. Proprietary Theory 2. Entity Theory 3. Fund Theory 4. Residual Equity Theory 5. Enterprise Theory. 1. Proprietary Theory: Under the proprietary theory, the entity is the agent, representative, or arrangement through which the individual entrepreneurs or shareholders operate. In this theory, […]

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