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Types of Equity Accounts and Current Liability

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What are the types of equity accounts? What is the role of equity accounts in raising capital? Under what circumstances would you not pay a dividend? Under what circumstances would you pay a dividend?

What is a current liability? What is a noncurrent liability? What is the difference between the two types of liabilities? In which financial statement would you find these liabilities?

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Solution Summary

In approximately 700 words, this solution discusses the two types of equity accounts, what role they have in raising capital, and the circumstances in which a company would and would not pay a dividend. Then, a discussion on what a current and non-current liability is provided with where you would find these liabilities in a financial statement.

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What are the types of equity accounts?

There are two types of equity accounts.

1. Share equity account: The amount of capital paid by the share holders towards the equity capital of the company. For example, if the company has 100000 equity shares of $10 par value and $2 per share being paid up, then the paid up value of the amount is $200000. Share capital account will show the amount of $200000 as its balance.

2. Retained earnings account: This account is also equity account which is created by retaining the profit earned by the company over the years. The amount of retained earnings belongs to the equity holders as the amount of profit belongs to the equity holders who are the owners of the company. If the company retains $400000, the amount of profit instead of distributing the same to the shareholders, then this amount will be credited to the retained earnings account.

What is the role of equity ...

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