Stockholder's interest is also referred to as residual interest. Stockholders equity is equivalent to net assets.
There are two primary sources of capital
What is capital?
Corporate finance, capital is considered equivalent to the total assets of the
firm.
Law, capital is considered the assets retained to protect creditors.
Accountants, refer to capital as stockholder's equity.
States require that firms retain legal capital which is the sum of the par value of
all stock issued or some minimum stated capital amount established by the state of
incorporation.
Why a corporation?
Shareholder's their rights as shareholders protected by the following sources
Types of Stock
Types of Preferred Stock
Par Value stock is stock which has a stated face value (i.e., $1.00). When par value stock is issued it is carried on the balance sheet at its par value. The amount received in excess of par upon stock issuance is recorded in the additional paid-in capital section of the stockholder's equity section of the balance sheet.
No Par stock is simply stock issued that has no stated face value. When this stock is issued it is generally recorded at issue price in the common stock account of the stockholder's equity section of the balance sheet. There is no need for an additional paid-in capital account when no par value stock is issued.
Although many states allow firms to issue no par stock they sometimes require a minimum stated capital for each corporation. Although not called par this minimum stated capital becomes the par value of issued stock and an additional paid-in capital account records the excess received over the minimum stated capital upon issuance.
Treasury Stock is repurchased corporate stock. There are two ways to account for treasury stock; the par value method and the cost method. The par value method is preferred.
Dividends are distributions from the corporation to its shareholders. Many factors besides profits can affect the corporations ability to pay dividends. Some of those include:
Dividend Types
Stock Splits can be distinguished from stock dividends because of the magnitude of the issuance. Stock splits provide a substantial amount of new stock outstanding and reduce the par value of each the common stock split. Stock dividends increase outstanding shares (but not as much) and have no effect on par value.
Summary Table for Effects of Various Dividends On Financial Statement Elements