What Is the Accounting Equation? Briefly Explain Each of the Three

question 75

Essay

What is the accounting equation? Briefly explain each of the three parts.

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Definitions:

Stockholders' Equity

Funds owned by the shareholders of a company, calculated as the company's total assets minus its total liabilities, representing ownership interest in the company.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company’s profits via dividends.

Authorized Shares

The maximum number of shares that a corporation is legally allowed to issue, as specified in its articles of incorporation.

Reacquired Shares

Shares that a company buys back from its shareholders, reducing the amount of outstanding stock on the market.