Accounting Notes

C corporation-corporation that doesnít qualify for and elect to be treated as a partnership for income tax purposes and therefore is subject to income taxes

General partner- partner who assumes unlimited liability for the debts of the partnership: responsible for partnership management

General partnership- partnership in which all partners have mutual agency and unlimited liability for partnership debts

Limited liability company- form of organization that combines corporation and limited partnership features provides limited liability to its members (owners), and allows members to actively participate in management

Limited liability partnership- partnership in which a partner is not personally liable for malpractice or negligence unless that partner is responsible for providing the service that resulted in the claim

Limited partners- partners who have no personal liability for partnership debts beyond the amounts they invested in the partnership

Limited partnership- partnership that has two classes of partnersí limited partners and general partners

Mutual agency- legal relationship among partners whereby each partner is an agent of the partnership and is able to bind the partnership to contracts within the scope of the partnershipís business

Partner return on equity- partner net income divided by average partner equity

Partnership- unincorporated association of two or more persons to pursue a business for profit as co-owners

Partnership contract- agreement among partners that sets terms under which the affairs of the partnership are conducted

Partnership liquidation- dissolution of a partnership by (1) selling noncash assets and allocation any gain or loss according to partnersí income-and-loss ratio, (2) paying liabilities, and (3) distributing any remaining cash according to partnersí capital balances

S corporation- Corporation that meets special tax qualifications so as to be treated like a partnership for income tax purposes

Statement of changes in partnersí equity- financial statement that shows total capital balances at the beginning of the period, any additional investment by partners, the income or loss of the period, the partnerís withdrawals, and the partnersí ending capital balances: also called statement of partners capital.

Unlimited Liability- legal relationship among general partners that makes each of them responsible for partnership debts if the other partners are unable to pay their shares

Appropriated retained earnings- retained earnings reported separately to inform stockholders of funding needs

Authorized stock- total amount of stock that a corporationís charter authorizes it to sell

Basic earnings per share- net income less preferred dividends divided by weighted average common shares outstanding

Book value per common share- recorded amount of equity applicable to common shares divided by the number of common shares outstanding

Book value per preferred share- equity applicable to preferred shares (equals the preferred shareís call price[or par value if the preferred is not callable] plus any cumulative dividends in arrears) divided by the number of preferred shares outstanding

Callable preferred stock- preferred stock that the issuing corporation, at its option, may retire by paying the call price to preferred stockholders plus any dividends in arrears

Call price- amount that must be paid to call and retire a preferred share

Capital stock- general term referring to a corporationís stock used in obtaining capital (owner financing)

Changes in accounting estimates- corrections to previous estimates of future events and outcomes; accounted for in current and future periods

Common stock- a corporationís basic stock; usually carries voting rights for controlling the corporation

Complex capital structure- capital structure that includes outstanding rights or options to purchase common stock or securities that are convertible into common stock

Contributed capital- total amount of cash and other assets received from stockholders in exchange for stock

Convertible preferred stock- preferred stock with an option to exchange it for common stock at a specified rate

Contributed capital in excess of par value- difference between the par value of stock and its issue price when issued at a price above par

Corporation- entity created by law and separate from its owners

Cumulative preferred stock- preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid

Date of declaration- date the directors vote to pay a dividend

Date of payment- date the corporation makes the dividend payment

Date of record- date specified by directors for identifying stockholders to receive dividends

Diluted earnings per share- earnings per share calculation that requires dilutive securities be added to the denominator of the basic EPS calculations

Dilutive securities- securities having the potential to increase common shares outstanding; examples are options, rights, convertible bonds, and convertible preferred stock

Discount on stock- difference between the par value of