Provide some examples of items that would be adjusted directly against equity, rather than being included as a part of proft and loss
Provide some examples of items that would be adjusted directly against equity, rather than being included as a part of proft and loss
Shareholder's equity:
The amount remaining after subtracting company long term and short term liabilities from the assets is the shareholder's equity. The statement of shareholders' equity includes various items such as a common stock which summarize equity transactions, retained earnings i.e. amount invested by the owner, additional paid-in capital, and accumulated other comprehensive income.
It is the 'Accumulated other comprehensive income' as a part of the line item in the balance sheet which includes items that are directly adjusted against equity and do not become a part of profit or loss.
Accumulated other comprehensive income:
Accumulated other comprehensive income (OCI) represents the unrealized gains and losses that are reported in the equity section as a part of the balance sheet.
Other comprehensive income includes both the gains and losses accounted for different types of investment. These investments can range from pension plans to hedging transactions. These transactions are not a part of the net income since the gains and losses on them have not been realized. Investors should look at the OCI account to check for any potential risks or any windfall gains during the year.
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