The Codification Topic 505-20 describes the stockholder's equity, including complete and comprehensive information about stock dividends and stock splits. It also highlights more about treasury stock and other forms of equity-based payments to non-employees. There are several amendments on this topic based on the provisions of stock splits and dividends. I have learnt a new concept about the corporate issue on common shareholders. Stock dividends are issued to common stockholders by the business from the accumulated net income without distributing it in the form of cash or any asset form thus, it becomes part of the retained earnings (Brenner & Watkins, 2012) . After the issuance of the stock dividends, the interests of the stockholders and the organization’s property remain unchanged. Besides, the proportional interests of the stockholders remain unaffected.
Additionally, I have had a deeper understanding of common shares. For instance, if the end of a financial period has seen an increase in common shares as a result of stock splits and stock dividends, the earnings per share will also be affected and must therefore be adjusted accordingly. This helps to reflect such changes retrospectively for the changes that occur in the capital structure of the company. Moreover, changes in common shares at the end of a trading period before financial reporting should be adjusted according to the latest amounts of outstanding common shares. Such changes need to be reflected and calculated. Therefore, I have leant that stockholder's equity includes stock, capital, retained earnings, and is not limited to the contents of a balance sheet. Based on my research on the various FASB sections, my knowledge of stock and concepts on retained earnings changed. At first, I did know that the interests of businesses and the stockholders are not affected by the issuance of stock dividends
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References
Brenner, V. C., & Watkins, A. L. (2012). Introducing students to the FASB Codification System. The Accounting Educators' Journal , 21 (1).
