equity
-
Residual
OWNERS CONTROL
interest in
a business
RETAINED EARNINGS
after
deducting
RESERVES @ HISTORICAL COST
all
liabilities
from assets
EQUITY vs LIABILITY
- Equity usually has no redemption or redeemed at board’s decision
- Liability redeemed at holder’s decision
SHARE CAPITAL vs RESERVES
- Share capital: Contributions by shareholders with no obligation to distribute funds
- No definition for reserves, they arise from transactions that do not involve actual
changes in equity.
Types of reserves
Retained earnings
Gains and losses i.e. Revaluation, mark
to market
Statutory reserves