ABOUNT ACCOUNTING PRINCIPALS

1. Topic
Different
aspect of
corporation.

2. Presented Miss
to: Raheela
Naila,
Presented
Iqra,
by:
Saira,Saba

3. Corporation is a type of business, which means
a legal entity that is separate and distinct form
of its owner.

4. Corporations must have at least one owner. The
owners are called shareholders or stockholders.
The ownership interests of the shareholders in
a corporation are divided into units called
stock, shares, or shares of stock. The rules
governing corporations along with the
advantages and disadvantages apply equally to
corporations owned by one or more than one
shareholder.

5.  Owners have limited liability.
 It can exist with continuity.
 Shares of ownership are transferable.
 It attracts more investors.
 You can be employee of your own corporation.
 The corporation pays its own tax.

6.  Incorporation is costly.
 It is not easy to dissolve.
 It may result to double taxation.
 Corporations are highly regulated.
 Limited liability may discourage the creditors.

8.  Board of Directors and Officers' Role in a
Corporation
 The Employee's Role in a Corporation
 Shareholders or Owners' Role in a Corporation

9. Stock
holders
Board of
holders
President
Vice Vice
Treasure Vice president president
or vice Controller president (production (personnel
president (sales) ) )
Organizational structure of corporation

10.  The primary responsibility of the board of
directors is to protect the shareholders'
investment.
 They are elected by the shareholders for this
reason.
 The board of directors is responsible for
drafting and amending the company by-laws
and appointing committees as necessary.

11.  Employees are those who make the business
run.
 They carry out the various tasks associated
with the company's mission. Employees report
to the officers of the company.

12.  The shareholders own the corporation.
 This group routinely votes on election and
removal of directors, amending by-laws, major
corporate changes.
 The level of shareholder influence on the
board of directors is one of many things to
consider when forming a new corporation.

13.  A shareholder or stockholder is an individual
or institution (including a corporation) or
person, that legally owns any part of a share of
stock in a public or private corporation.
Shareholders own the stock, but not the
corporation itself.

14. Stockholders are granted special privileges
depending on the class of stock. These rights may
include:
 The right to sell their shares,
 The right to vote on the directors nominated by the
board,
 The right to nominate directors (although this is
very difficult in practice because of minority
protections) and propose shareholder resolutions,
 The right to dividends if they are declared,
 The right to purchase new shares issued by the
company, and
 The right to what assets remain after a liquidation.

16.  Selecting, evaluating, and dismissing
the chief executive officer (CEO)
 Reviewing and approving the
corporation's financial objectives and
strategy, the annual budget, and the
business plan
 Providing advice to senior management

17.  Selecting and recommending candidates
for the board of directors to shareholders
for election;
Approving dividends and stock splits;
 Ensure the safe preservation of the books
and records Designate a safe depository for
surplus funds and investment…….and
 Reviewing the adequacy of systems to
conform to applicable laws and regulations.

18.  Owner’s Equity is represented in Balance sheet
 In Corporation type business owner’s equity is
called stock holders equity. The equity of each
stock holder is not shown in balance sheet. This
clearly would not be possible as large
corporation often have several million
individual stockholders.

19. 1) Capital Stock
2) Retained Earnings
Capital stock represents the amount which
the stock holders originally invested in the
business in exchange for shares of the
company’s stock.
Retained earnings Retained earnings are the
earnings the corporation generates but does not
distribute to shareholders.

21. The portion of stockholders, equity
resulting from profits earned and retained in
the business. Retained earnings is increased by
the earning of net income and is decreased by
the incurring of net losses and by the
declaration of dividends.

22. If the net income of the year is $70,000,
the closing entry will be as follows:
Income summary………………..70,000
Retained
Earnings…………………………70,000
(To close the income summary account by
transferring the year’s net income into the
Retained Earnings account).

23. If the company operates at a loss of ,say
$25,000, the income summary account will have
a credit balance . The account must then be
debited to close it such as
Retained Earnings…………….25,000
Income summary………………….25,000

24. When stockholders invest cash in the
business, the corporation issues to them in
exchange shares of capital stock as evidence
of their ownership. Capital invested by the
stockholders is recorded in the corporation’s
accounting records by a credit to an account
entitled capital stock.

25. Capital stock is transferable unit of
ownership in a corporation. The stockholder
has no restriction to sell his share.

26. Common stock:
A type of capital stock which possesses
the basic rights of the ownership including the
rights to vote. Represent the residual element
of ownership in a corporation.
Preferred stock:
A class of capital stock usually having
Preferences as to dividends and in the
distribution of assets in event of liquidation.

27.  Thank you for attention