Explain Why Is It Important To Keep Paid-In Capital Separate From Earned Capital?
Introduction Owners' equity has been a subject that I have only touched on throughout the last few months of my intermediate accounting classes. It is my intentions to answer the questions that best that I can but I will have to rely heavily on our text to provide the answers.
Why is it important to keep paid-in capital separate from earned capital? It is important to distinguish between paid-in capital and earned capital in order to understand why the two should be kept separate. Paid-in capital, which is also referred to as contributed capital, "Is the total amount paid in on capital stock." This is money received from investors to purchase stock in the company. Earned capital is not monies received from outside investors. It is, "the
Why is it important to keep paid-in capital separate from earned capital? It is important to distinguish between paid-in capital and earned capital in order to understand why the two should be kept separate. Paid-in capital, which is also referred to as contributed capital, "Is the total amount paid in on capital stock." This is money received from investors to purchase stock in the company. Earned capital is not monies received from outside investors. It is, "the