Owner's Equity Paper Essay Example | Topics and Well Written Essays - 750 words

Owners Equity Paper - Essay ExampleIf each happens, Financial Statements of a seam become invalid or forged. If we show two(prenominal) Earned and compensable Capital in the head of Earned Capital then our pay figure entrust be everyplacestated and financial statements will lose their validity. Similarly, if Earned and Paid-in Capital are shown as an Investment, then assets will become overstated and again the financial statements of a company will lose their validity. These were the reason why we keep Earned Capital sepa mark from Paid-in Capital. (2003)Both Earned and Paid-in Capital are important at their own place. Without either of them, the company cannot thrive or operate smoothly. No business can apparatus without the investment by shareholders or owners, similarly, no business can continue to exist unless it earning decent rate of profits. Therefore, both are really important for the formation and smooth running of the business. However, looking at both of them crit ically, one can state that it is the Paid-in Capital that is more important because only after a business is setup, it starts earning profit. So, without Paid-in Capital there would be no Earned Capital and hence Paid-in Capital has some merits over Earned Capital. Another reason for the importance of Paid-in Capital is the fact that a business can rescue losses for some period and may continue to exist on Paid-in Capital. We can conclude that both Earned Capital and Paid-in Capital are equally important, but it is the Paid-in Capital which gets the lead out of the two.harmonize to Wachowicz, Basic Earning is the simplest method to find out the earning per share that a firm has made over its gravid shares. It is calculated by dividing net profit with number of shares outstanding. For e.g., suppose that a company earns a profit of $5 Million in a fiscal year. It has currently 10 Million Shares issued to shareholder. Its basic earning in this case