The financial statements provide useful accounting information about the financial status of the enterprise at the end of the reporting period and the results of the financial activities of the enterprise during the reporting period. The financial status of a business, or condition, is the amount of money the business uses to purchase various investment and operational assets, and the proceeds from various sources of debt and equity to finance the purchase of assets. The results of a business’s financial performance refer to any change in the financial condition of the business over time. Common stock is a form of equity that is related to both the financial status and financial performance of the business, and appears in various financial statements.
The set of financial statements of an enterprise consists of 4 components: balance sheet, business results report, cash flow statement and shareholder equity report. While the balance sheet reveals the financial condition of a business, the other three reports document changes in different aspects of the business over a specified period of time. Common stock is part of both the balance sheet and the shareholder’s equity statement. The balance sheet measures the number of common shares at the end of the reporting period, while the shareholder equity statement tracks any increase or decrease of common stock during the reporting period.
Common stock as equity is a source of money used to finance certain long-term capital needs. The business may issue common shares at any time during the accounting period. A business can also repurchase a certain number of common shares at any time during the accounting period. The number of issuances and acquisitions of common shares is reported at the end of the accounting period. The business may also reissue and repurchase common shares in subsequent accounting periods and report outstanding issues of common stock at the end of any and any changes in the period.
Ordinary shares are part of the balance sheet under the shareholder’s equity. A balance sheet is a report on the number of assets, liabilities and equity of a business at the end of the reporting period. Common stock as a form of equity is listed below shareholder equity in the balance sheet and is usually classified as capital shares and additional contributed capital. While the equity represents the face value of the issued common stock, the additional contributed capital represents the amount of the shareholders paid in excess of face value. The balance sheet reports the total number of common shares at the end of the reporting period, but it does not show any changes to common shares during the period.
Shareholder Equity Statement
Common shares are also part of the shareholder’s equity statement, which records any increases and decreases in shareholder equity during the reporting period, including common shares. To record any changes to common stock, the shareholder equity report lists both the amount of common stock at the beginning of the period – the same amount at the end of the previous period – and the inflows in and outflows from common stock. – account store during the period. Then, the report adds changes to the number of common shares at the beginning of the period to reach the end-of-term quantity, which must be in line with the number of common shares reported in the balance sheet.