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