Asked by Randell Baley on Jul 14, 2024
Verified
Stockholders' equity,also called shareholders' equity,includes which of the following two accounts?
A) Common stock and Deferred revenue.
B) Common stock and Retained earnings.
C) Liabilities and Retained earnings.
D) Retained earnings and Cash.
Stockholders' Equity
The portion of a company's assets that belongs to shareholders after deducting liabilities, representing ownership interest.
Common Stock
A type of security that signifies ownership in a corporation and represents a claim on part of the company's profits or losses.
Retained Earnings
The segment of net profit held back by the business rather than being shared with its proprietors in the form of dividends.
- Identify and categorize different components of stockholders' equity and comprehend disclosure requirements related to shares.
Verified Answer
MD
Michael DimasJul 20, 2024
Final Answer :
B
Explanation :
Stockholders' equity includes both common stock (which represents the initial investment by shareholders) and retained earnings (which represents the cumulative net income of the company that has not been distributed as dividends). Therefore, the correct answer is choice B, which includes both common stock and retained earnings. Choice A is incorrect because deferred revenue is a liability account, not a stockholders' equity account. Choice C is incorrect because liabilities are not part of stockholders' equity. Choice D is incorrect because cash is an asset account, not a stockholders' equity account.
Learning Objectives
- Identify and categorize different components of stockholders' equity and comprehend disclosure requirements related to shares.