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Lecture Accounting principles – Chapter 13: Introduction to corporations

In this chapter students will be able to: Identify and discuss characteristics of the corporate form of organization, account for the issuance of common and preferred shares, prepare a corporate income statement, account for cash dividends,. | Introduction to Corporations The corporate form of organization Characteristics Operating a corporation Share capital Issuing shares Preferred shares Retained earnings Corporate income statements Cash dividends Reporting retained earnings Statement presentation and analysis Copyright John Wiley & Sons Canada, Ltd. 2 CHAPTER 13: Introduction to Corporations Identify and discuss characteristics of the corporate form of organization. Account for the issuance of common and preferred shares. Prepare a corporate income statement. Account for cash dividends. Prepare a statement of retained earnings and closing entries for a corporation. Prepare the shareholders’ section of the balance sheet and calculate return on equity. Copyright John Wiley & Sons Canada, Ltd. 3 The Corporate Form of Organization A legal entity separate from its owners (known as shareholders) Classified by purpose and ownership: Purpose: for profit or not-for-profit Ownership: Public corporation: shares are available for purchase on an organized securities market Private corporation: shares are held by a few individuals and are not traded Copyright John Wiley & Sons Canada, Ltd. 4 Characteristics of a Corporation Separate legal existence from its owners Acts under its own name Owners do not bind the corporation Limited liability of shareholders Limited to the amount of their investment Transferable ownership rights Shares may be bought and sold No effect on operating activities of corporation Ability to acquire capital Can raise capital by issuing shares May be difficult for closely-held corporations Copyright John Wiley & Sons Canada, Ltd. 5 Characteristics of a Corporation 2 Continuous and unlimited life Unaffected by change in ownership Government regulations Specific laws that govern operations of corporations Income tax Taxed as a separate entity Copyright John Wiley & Sons Canada, Ltd. 6 Forming a Corporation Can incorporate federally or provincially Done by filing articles of incorporation (the | Introduction to Corporations The corporate form of organization Characteristics Operating a corporation Share capital Issuing shares Preferred shares Retained earnings Corporate income statements Cash dividends Reporting retained earnings Statement presentation and analysis Copyright John Wiley & Sons Canada, Ltd. 2 CHAPTER 13: Introduction to Corporations Identify and discuss characteristics of the corporate form of organization. Account for the issuance of common and preferred shares. Prepare a corporate income statement. Account for cash dividends. Prepare a statement of retained earnings and closing entries for a corporation. Prepare the shareholders’ section of the balance sheet and calculate return on equity. Copyright John Wiley & Sons Canada, Ltd. 3 The Corporate Form of Organization A legal entity separate from its owners (known as shareholders) Classified by purpose and ownership: Purpose: for profit or not-for-profit Ownership: Public corporation: shares are available for