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By Robert Meigs, Jan Williams, Susan Haka, Mark Bettner

ISBN-10: 9584101005

ISBN-13: 9789584101006

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The $120,000 of stock issued during the accounting period is added to the beginning balance to determine the ending balance in the common stock account. In addition to reporting the changes in common stock, the statement describes the changes in retained earnings for the accounting period. RCS had no beginning balance in retained earnings. During the period, the company earned $35,000 and paid $4,000 in dividends to the stockholders, producing an ending retained earning balance of $31,000 ($0 1 $35,000 2 $4,000).

They will be explained as new transactions are presented. Recall that the number of accounts a company uses depends on the nature of its business and the level of detail management needs to operate the business. For example, Sears would have an account called Cost of Goods Sold although GEICO Insurance would not. Why? Because Sears sells goods (merchandise) but GEICO does not. Also, notice that a stock issue transaction affects the accounting equation in two places, both under an asset (cash) and also under the source of that asset (common stock).

Using Accounts to Gather Information Detailed information about the elements is maintained in records commonly called accounts. For example, information regarding the element assets may be organized in separate accounts for cash, equipment, buildings, land, and so forth. The types and number of accounts used by a business depends on the information needs of its stakeholders. Some businesses provide very detailed information; others report highly summarized information. The more detail desired, the greater number of accounts needed.

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Contabilidad la base de las decisiones gerenciales by Robert Meigs, Jan Williams, Susan Haka, Mark Bettner


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