The sources of owners' equity include capital invested by owners, gains and losses directly included in owners' equity, retained earnings, etc.

Profits and losses that are directly included in the owner's equity refer to those that should not be included in the current profit and loss, will cause increases or decreases in the owner's equity, and have nothing to do with the owner's capital investment or profit distribution to the owner. gains or losses.

Among them:

Profit refers to the inflow of economic benefits formed by the non-routine activities of the enterprise, which will lead to an increase in the owner's equity and has nothing to do with the capital invested by the owner. It is divided into:

(1) Gains directly included in the owner's equity;

(2) Gains directly included in the profits of the current period.

Loss refers to the outflow of economic benefits that occurs due to non-daily activities of the enterprise, leads to the reduction of owners' equity, and has nothing to do with the distribution of profits to owners. Divided into:

(1) Losses directly included in owners’ equity;

(2) Losses directly included in current profits.

Characteristics of owners’ equity

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Compared with creditors’ equity, owners’ equity generally has the following four basic characteristics:

1． Owners' equity can be used by the company for long-term and continuous use during the business period, and the company does not have to return capital to investors. Liabilities must be returned to creditors on time and become a burden on the company.

2． Enterprise owners enjoy the right to distribute after-tax profits based on the capital they invest in the enterprise. Owners' equity is the main basis for a company to distribute its net profit after tax, and creditors have no right to distribute the company's profits except for dividends as required.

3. The owner of an enterprise has the right to exercise the operation and management rights of the enterprise, or authorize managers to exercise the operation and management rights. But creditors do not have management rights.

4． The owners of a company have unlimited or limited liability for the company's debts and losses, while creditors have no relationship with the company's other debts and generally do not bear the company's losses.

Classification of owners’ equity

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1. Owners’ equity is divided into invested capital, capital reserve and retained capital according to its composition. Three categories of income.

1. Input capital

Input capital refers to the capital actually invested by the owner within the scope of the registered capital of the enterprise. The so-called registered capital refers to the total capital registered with the industrial and commercial administration department when an enterprise is established, that is, the sum of the capital contributions set by all investors. Enterprises should raise capital in a timely manner in accordance with laws, regulations, contracts and articles of association. If it is raised in one go, the invested capital should be equal to the registered capital; if it is raised in installments, after the owner pays the last capital, the invested capital should be equal to the registered capital. Registered capital is the legal capital of an enterprise and is the financial guarantee for the enterprise to bear civil liability.

In different types of enterprises, the forms of investment capital are different. In a joint-stock company, the invested capital is represented by the face value of the shares actually issued, also known as share capital; in other enterprises, the invested capital is represented by the owner's actual investment within the scope of registered capital, also called paid-in capital.

According to the nature of the owner, invested capital can be divided into state-invested capital, legal person-invested capital, individual-invested capital and foreign-invested capital. State-invested capital refers to the capital formed by government departments or institutions with the right to invest on behalf of the state investing state-owned assets into enterprises; legal person-invested capital refers to the capital formed by units with legal person status in my country investing in enterprises with the assets they can control according to law; Personal investment capital refers to the capital formed by Chinese citizens investing their legal property into enterprises; foreign investment capital refers to the capital formed by foreign investors and investors from Hong Kong, Macao and Taiwan in my country investing assets into enterprises.

According to the different forms of invested assets, invested capital can be divided into monetary investment, physical investment and intangible asset investment.

2. Capital reserve

Capital reserve refers to the capital owned by the owner and formed by non-income conversion, mainly including capital premium (equity premium) and other capital reserves, etc.

3. Retained earnings Retained earnings refer to the owner’s equity that is owned by the owner and formed by the conversion of earnings. It mainly includes statutory surplus reserve, discretionary surplus reserve and undistributed profits. .

2. Owners’ equity can be classified according to economic content and formation channels.

1． Owners' equity is divided according to economic content and can be divided into four types: invested capital, capital reserve, surplus reserve and undistributed profits.

(1) Invested capital refers to the various properties and materials actually invested by investors in the economic activities of enterprises, including state investment, legal person investment, personal investment and foreign investment. State investment refers to the capital invested by state-owned assets in enterprises by departments or institutions with the right to invest on behalf of the state; legal person investment refers to the capital invested in enterprises by corporate legal persons or other legal entities with the assets they can control according to law; personal investment refers to the capital invested by individuals in society or within the enterprise. The capital formed by employees investing their legal property into the enterprise; foreign investment is the capital invested by foreign investors and investors from Hong Kong, Macao and Taiwan.

(2) Capital reserves are net assets increased through corporate non-operating profits, including various property and materials obtained from donations, revaluation and appreciation of statutory property, capital exchange rate conversion differences and capital premiums. Acceptance of donations refers to the capital reserve increased by an enterprise due to accepting cash or in-kind donations from other departments or individuals; legal property revaluation and appreciation refers to the assets assessed by the enterprise due to division, merger, change and investment, or assets stipulated in contracts and agreements. The difference between the value and the original net book value; the capital exchange rate conversion difference refers to the exchange difference that occurs due to exchange rate changes when the enterprise receives foreign currency investment; capital premium refers to the difference between the capital contribution paid by the investor and its subscribed capital, including The net premium income from the issuance of shares by a joint stock company and the net premium income from the conversion of convertible bonds into equity, etc.

(3) Surplus reserve refers to the reserve fund withdrawn by the enterprise from the net profit after tax. Surplus reserves can be used to make up for corporate losses according to regulations, or can be converted into capital in accordance with legal procedures. The statutory provident fund withdrawal rate is 10%.

(4) Undistributed profits are the remaining profits after profit distribution of the net profits realized during the year, waiting for future distribution. If undistributed profits are negative, it means that the uncompensated losses at the end of the year should be made up by profits or surplus reserves in subsequent years.

2． If the owner's equity is divided according to the formation channel, it can be divided into the original investment capital and the capital formed in the operation. The original capital invested includes invested capital and capital reserves, and the capital formed in operations includes surplus reserves and undistributed profits.

Relevant provisions

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Relevant provisions of the "Accounting Standards for Business Enterprises - Basic Standards" on owners' equity:

Article 26 Owners’ equity refers to the remaining equity enjoyed by the owner after deducting liabilities from the assets of the enterprise.

A company’s owner’s equity is also called shareholder equity.

Article 27 The sources of owners’ equity include capital invested by owners, gains and losses directly included in owners’ equity, retained earnings, etc.

Profits and losses that are directly included in the owner's equity refer to those that should not be included in the current profit and loss, will cause increases or decreases in the owner's equity, and have nothing to do with the owner's investment in capital or the distribution of profits to the owner. gains or losses.

Profit refers to the inflow of economic benefits formed by the non-routine activities of the enterprise, which will lead to an increase in the owner's equity and has nothing to do with the capital invested by the owner.

Loss refers to the outflow of economic benefits that occurs due to non-daily activities of the enterprise, leads to the reduction of owners' equity, and has nothing to do with the distribution of profits to owners.

Article 28 The amount of owners’ equity depends on the measurement of assets and liabilities.

Article 29 Owner’s equity items shall be included in the balance sheet.

Conditions for confirmation of owner’s equity

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Owner’s equity reflects the owner’s remaining equity in the enterprise. Therefore, all The recognition of owners' equity mainly depends on other accounting factors, especially the recognition of assets and liabilities; the determination of the amount of owners' equity also mainly relies on the measurement of assets and liabilities.

Owner's equity reflects the owner of the enterprise Liabilities reflect the claim rights of corporate creditors to corporate assets. The two are essentially different in nature. Therefore, companies should strictly distinguish liabilities and owners' equity in accounting recognition, measurement and reporting to truthfully Reflects the financial status of the company, especially the company's solvency and equity ratio. In practice, certain transactions or events of the company may have the characteristics of both liabilities and owners' equity. In this case, the company should classify it as a liability Account and present separately from the owner's equity part. For example, for convertible corporate bonds issued by an enterprise, the enterprise should separate the liability part and the equity instrument part and recognize the liability and owner's equity respectively.

Differences from creditor's rights

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The significant differences between the two are mainly reflected in the following points:

1. Creditors have a stronger claim to a business's assets than owners' equity.

2． Investors in an enterprise can participate in the operation and management of the enterprise, but creditors often have no right to participate in the operation and management of the enterprise.

3. For owners, as long as the company continues to operate, they generally cannot withdraw their investment in advance except for capital reduction in accordance with legal procedures. Liabilities generally have a specified repayment period and must be repaid within a certain period of time.

4. Investors participate in the company's profit distribution in the form of dividends or profits. The creditor's claims can only be repaid and interest income earned according to specified conditions.

Comparison of owners’ equity between China and foreign countries

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International accounting standards and many countries and regions have not formulated separate accounting standards for enterprise owners’ equity. . Generally, other accounting standards only stipulate related owner's equity issues, which often only involve the disclosure of owners' equity in accounting statements, or simply require enterprises to comply with relevant legal provisions for accounting treatment. The main reason is that The laws of various countries have made detailed provisions on the handling of matters involving owners' rights and interests. my country's "Company Law" and other relevant laws have stipulated the handling of major matters involving the owners' rights and interests of enterprises. Considering that the accounting treatment of matters involving owners' equity is systematically standardized in a separate standard to facilitate the actual operation of enterprises, my country treats owners' equity as an independent standard item.

Due to the unique organizational form, operation mode and important status of joint-stock companies in social and economic life, other countries or regions regard them as important regulatory objects of laws or accounting standards. In our country, with the establishment of the socialist market economic system, joint-stock companies will play an increasingly important role in my country's social and economic life, and the accounting of owners' equity of joint-stock companies has unique requirements. The Company Law, etc. The law is also relatively clear. To this end, my country's specific standards describe the accounting of the owners' equity of a joint stock company as a separate category. For enterprises other than joint stock limited companies, the accounting treatment involving owners' equity is basically the same. For this reason, my country's specific accounting standards for owners' equity combine the accounting treatment of owners' equity of enterprises other than joint stock limited companies into one category for presentation.

my country’s specific accounting standards for owners’ equity include three parts: introduction, main body and supplementary provisions. The introduction mainly explains the scope regulated by this standard, that is, the accounting of enterprise owners' equity and the disclosure of accounting statements. The main text consists of nine natural sections: definition, composition of owner's equity, invested capital, increased capital, issuance expenses, acceptance of donations and asset revaluation, profit distribution and loss compensation, capital reduction, and matters that should be disclosed. Defining a paragraph paves the way for further development of the criterion, and also provides a basis for us to correctly understand and use the criterion. The section "Composition of Owner's Equity" points out the contents included in owner's equity, and then regulates the accounting treatment of invested capital, increased capital, acceptance of donations, profit distribution, losses and reduction of capital respectively. The section on issuance costs introduces how stock underwriting fees, CPA fees, valuation fees, lawyer fees, public advertising fees, printing fees and other expenses when a company issues stocks are handled when stocks are issued at par or at a premium.

Matters that should be disclosed are explained in the following paragraphs. The appendix specifies the right to interpret the code and its effective date.

(1) About the composition of owners’ equity

In international accounting standards, the owner’s equity part is called owners’ equity and shareholders’ equity, and its composition is as follows:

(1) Paid-in capital, that is, the equity actually paid in by shareholders;

(2) Capital surplus, that is, stock premium;

(3) Asset appreciation, that is Surplus formed by revaluation of corporate assets due to changes in price levels;

(4) Retained earnings, that is, the remainder of corporate earnings after paying dividends;

(5) Non-shareholders Donations to businesses.

Compared with my country’s owners’ equity, paid-in capital is basically the same as my country’s paid-in capital. Capital surplus, capital appreciation, and assets donated by non-shareholders all correspond to my country's capital reserve concept; retained earnings correspond to my country's undistributed profits. Our country has the concept of "surplus reserve", which is the content of owners' equity and represents the relevant amount withdrawn from profit distribution. In our country, the financial system stipulates that the statutory surplus reserve fund and public welfare fund must be withdrawn from tax profits in proportion, and the amounts withdrawn from these two parts shall be put into the "surplus reserve". However, this is not the case in Western countries, which only add the after-tax The profits are distributed as dividends, and the remainder is retained earnings.

U.S. owners’ equity is generally divided into paid-in capital and retained earnings. Paid-in capital is shareholder equity, including common shares and preferred shares. If there is paid-in capital exceeding the par value, it will be listed as a separate item.

Japanese owners’ equity is capital. Capital must be divided into a capital part and a surplus part. The capital part shall list its statutory capital amount. The disbursed funds are divided into capital reserve fund, profit reserve fund and other reserve funds, and are listed separately. The capital reserve fund includes the surplus transferred due to the issuance of shares. The profit reserve fund includes surplus derived from profits. Other provident funds include discretionary provident funds and distributed profits at the end of the period.

Ownership equity in the UK generally includes capital and reserves. It is usually divided into seven parts: paid-in capital, capital premium, revaluation reserves, other reserves and profits and losses. Other reserves include capital redemption reserves, self-owned share reserves, reserves withdrawn in accordance with the company's articles of association, etc.

(2) About invested capital

The capital mentioned here is capital in a narrow sense, that is, the registered capital paid by the owner to the enterprise.

For the capital of joint-stock companies, the United States, Britain, the Netherlands and other countries adopt the "authorized capital system". According to this capital system, the company's capital is divided into "rated capital" and "issued capital". The company must specify the amount of authorized capital in its articles of association, but only part of it and the rest will be left to decide whether to issue it in the future based on the needs of the company's business development. Therefore, the authorized capital does not represent the assets actually owned by the company, but only the maximum amount of capital that the company has the right to raise through the issuance of shares. It is a kind of nominal capital, and the issued capital is the company's real capital.

Most civil law countries such as France and Germany adopt the "court-determined capital system". According to this system, the company's capital stated in the company's articles of association must be fully subscribed by the shareholders when the company is established. Completed, otherwise the company will not be established. If the company increases capital, it must amend its articles of association. The statutory capital system is conducive to ensuring that companies have sufficient capital and preventing companies from being used for fraud and speculation. However, its requirements are too stringent and do not meet the objective needs of the development of modern joint-stock companies. In recent years, some civil law countries have begun to abandon or partially abandon the statutory capital system and imitate the authorized capital system. For example, the Japanese Company Law stipulates that a company needs to issue more than a quarter of the total number of shares when it is established. The German Joint Stock Company Law stipulates that , when the board of directors issues new shares to increase capital based on the right granted by the shareholders' meeting, it can be completed once or multiple times, but the period shall not exceed five years.

my country currently implements a registered capital system. my country's "Regulations on the Registration and Management of Enterprise Legal Persons" stipulates that, unless otherwise specified by the state, the registered capital of an enterprise should be consistent with the practical capital. Registered capital is the limit of the enterprise's registered capital with the industrial and commercial administration department, so registered capital is also called statutory capital. The Company Law has clear provisions on the minimum registered capital of various types of companies. During the operating period of an enterprise, the registered capital can only be increased and cannot be reduced by transfer to ensure the legitimate rights and interests of creditors. When an enterprise's registered capital increases or decreases by more than 20%, it should apply for change registration to the original registration authority based on the fund use certificate or capital verification certificate.

If you change the registered capital without authorization or withdraw funds, you will be punished by the industrial and commercial administration department.

For the accounting of funds invested by owners, joint-stock companies set up the "share capital" account, and other enterprises set up the "paid-in capital" account for accounting. Therefore, the difference and connection between paid-in capital and registered capital must be clarified. Paid-in capital refers to the total amount of capital actually received by a company that has been invested by investors. The capital contribution subscribed by corporate investors is generally not invested all at once after identification, but is gradually invested in batches as the enterprise's infrastructure, production and operations develop according to the investment period specified in the contract or articles of association. Only when the capital contribution is paid in full as required, the paid-in capital of the enterprise will be equal to the registered capital. Although, the content of investment capital accounting can only be paid-in capital, not registered capital or total investment. In a joint-stock company, when investors purchase stocks above par value, the premium of the stock, after deducting issuance expenses, is included in the company's capital reserve, while the "equity" account only records the par value of the stock. At this time, the registered capital of the joint-stock company is the amount recorded in the "share capital" account, and the invested capital includes both share capital and premium. Other forms of enterprises will record the amount in the "paid-in capital" account when they receive investors' investment. Therefore, other received capital, registered capital, and invested capital are consistent when investors make full contributions in accordance with regulations.

(3) About the Provident Fund

The provident fund stipulated in our country's accounting system is essentially the equity enjoyed by the owners of the enterprise but cannot be distributed as profits. Capital reserves are capital investments that are related to paid-in capital but do not enjoy equity. Since capital is a legal amount, indicating the risks borne by the owner and the rights and interests enjoyed by the owner, it can only be listed separately and cannot be confused. Therefore, any capital investment that cannot be marked with limited liability or enjoy rights and interests must be listed separately. Surplus reserves are the same as foreign statutory reserves and are a means of limiting profit distribution.

The allocation of retained earnings in the United States is entirely the company's own business, and its proportion is determined by the shareholders' meeting. The law does not impose any mandatory provisions on this. The allocation of retained earnings imposes a restriction on profit distribution and does not require the allocation of corresponding assets. Capital investments that are related to paid-in capital but do not enjoy the owner's daily rights and interests are listed separately, such as "paid-in capital in excess of par value", "donated capital", etc.

Japan’s commercial law requires companies to establish the following reserves: (1) Capital reserves. That is the capital reserve fund mentioned earlier. Includes stock premiums and positive differences due to capital reductions or mergers. If the positive difference generated during the merger is equal to the sum of statutory reserves and other retained earnings of the merged company, it may not be regarded as statutory reserves but may be listed under capital reserves. (2) Legal preparation. That is the profit provident fund mentioned earlier. Japanese companies must set aside statutory reserves based on at least 10% of the cash dividends paid in each fiscal year, until 25% of the share capital is reached.

France’s provisions mainly include statutory provisions, agreed provisions, revaluation provisions and regulated capital gains provisions. French companies must withdraw court-determined reserves at 10% of the share capital; agreed reserves are reserves withdrawn according to relevant provisions of the company's articles of association or similar arbitrary reserves; revaluation reserves were established based on the statutory revaluation in 1975, which generally do not appear to be important now. . When capital gains are regulated, companies can claim a special tax rate of 15% if the gains are included in reserves. However, if it is used for distribution, the full amount of tax must be paid. For example, a profit of 100 francs, 15 francs of tax, and 85 francs of preparation; if it is used for distribution, the tax rate is 42%, and an extra payment of 27 francs is made. The profit available for distribution is 58 francs. Analysts should allocate 27/85 to deferred taxes and 58/85 to permanent equity.

my country's provident fund is divided into two categories, capital reserve and surplus reserve. Capital reserve fund includes capital premium, asset revaluation, capital conversion difference, and donated capital. The capital conversion difference is held by foreign-invested enterprises. The surplus reserve consists of the statutory surplus reserve and the discretionary surplus reserve. The statutory surplus reserve is accrued at 10% of the after-tax profits. It can no longer be accrued after 50% of the registered capital has been raised. The discretionary surplus reserve is determined by the shareholders' meeting in terms of the withdrawal ratio. . Our country also has an item that is neither a capital reserve nor a surplus reserve - undistributed profits. According to general understanding, after-tax profits are distributable profits after all provisions have been made. Since undistributed profits are distributable profits but not distributed, it seems difficult to understand. If undistributed profits are understood as restrictions on profit distribution, they should be undistributable profits, that is, discretionary surplus reserves.

(4) Accounting treatment of donations received

There are two basic ways to treat donations accepted by enterprises internationally: one is as income, the other is as ownership rights and interests. In some countries, it is stipulated that when a company accepts donated assets as owner's equity, its value also depends on whether the donor is a controlling shareholder of the company. If it is a controlling shareholder, it will be determined based on the historical cost; if it is not a controlling shareholder of the company and the donation is unconditional, it will be determined based on the fair value of the assets. my country's "Accounting Standards for Business Enterprises" and the accounting system stipulate that enterprises accept donated assets as owners' equity and include them in capital reserves. When accepting cash donations, the amount of the donation is recorded in the account; if a real donation is accepted, it is recorded at its fair value. .

(5) About profit distribution

my country stipulates that all enterprises must distribute profits according to procedures. In foreign countries, especially in Western countries, after-tax profits are distributed directly to shareholders as dividends.