Question

Provide some examples of items that would be adjusted directly against equity, rather than being included as part of profit or loss. (10 marks, maximum 650 words)

Answer 1

Items that would be adjusted directly against equity:-

1.) Cost of share repurchased as Treasury shares at cost is deducted from equity.

2.) Any stock ( Common  & Preferred ) issued at value more than the par, the excess of paid in capital over par value is added to Equity.

3.) Dividend paid being not reported on profit & loss is adjusted with retained earnings which utlimately adjusted with equity.

4.) When treasury stocks are sold more than cost , then excess amount received is credited to paid in capital in excess par-treasury stock which will be added to Equity.

answered by: anonymous