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You have been studying the most recent financial statements of Auckland International Airport Limited. The equity...

You have been studying the most recent financial statements of Auckland International Airport Limited. The equity section of Auckland International Airport Limited contains two main accounts: share capital and retained earnings. Explain how these two accounts are different from each other.

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Answer #1

Share capital and retained earnings are the part of the shareholders equity section of the balance sheet.

Share capital shows the face value of the shares of the company that is the money received from the shareholders of the company as a capital for the functioning of the company.

and the retained earnings shows the worth the company developed over time. It is the cumulative net income (after tax) which is earned by the company.

These two are completely different as to there definition and are not related to each other.

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