{"id":7717,"date":"2020-01-13T13:28:30","date_gmt":"2020-01-13T13:28:30","guid":{"rendered":"https:\/\/www.24x7acservice.com\/blog\/?p=7717"},"modified":"2024-01-17T14:36:24","modified_gmt":"2024-01-17T14:36:24","slug":"expanding-the-accounting-equation-accounting-and","status":"publish","type":"post","link":"https:\/\/www.24x7acservice.com\/blog\/expanding-the-accounting-equation-accounting-and\/","title":{"rendered":"Expanding the accounting equation Accounting and Accountability"},"content":{"rendered":"

Stockholder\u2019s equity refers to the owner\u2019s
\n(stockholders) investments in the business and earnings. These two
\ncomponents are contributed capital and retained earnings. Accounts payable recognizes that the company owes money and has
\nnot paid. Remember, when a customer purchases something \u201con
\naccount\u201d it job cost sheet definition<\/a> means the customer has asked to be billed and will pay
\nat a later date. Recall that the basic components of even the simplest accounting
\nsystem are accounts and a general ledger. Accounts shows all the
\nchanges made to assets, liabilities, and equity\u2014the three main
\ncategories in the accounting equation.<\/p>\n

Retained earnings represent a company\u2019s remaining net income after all of its dividends have been paid out to its shareholders. \u2014 At the end of the year, X ends up with large profits and the management decides to issue dividends to its shareholders. When dividends are issued, cash is disbursed to shareholders reducing assets while the dividends reduce equity. This transaction decreases assets when the cash is distributed and increases assets when the new equipment is received. Let\u2019s take a look at a few example business transactions for a corporation to see how they affect its expanded equation.<\/p>\n