Essential Terms and Definitions: Corporation, Stock and Dividend

This page contains essential accounting terms and definitions around the topic of corporation, stock, and dividend.

• Corporation – A business organized as a legal entity separate and distinct from its owners under state corporation law.
• Privately held corporation – A corporation that has only a few stockholders and whose stock is not available for sale to the general public.
• Publicly held corporation – A corporation that may have thousands of stockholders and whose stock is regularly traded on a national securities exchange.
• Charter – A document that creates a corporation.
• Paid-in capital – Total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock.
• Authorized stock – The amount of stock that a corporation is authorized to sell as indicated in its charter.
• Preferred stock – Capital stock that has some preferences over common stock.
• Treasury stock – A corporation’s own stock that has been issued and subsequently reacquired from shareholders by the corporation but not retired.
• Outstanding stock – Capital stock that has been issued and is being held by stockholders.
• Stated value – The amount per share assigned by the board of directors to no-par stock.
• Par value stock – Capital stock that has been assigned a value per share in the corporate charter.
• No-par value stock – Capital stock that has not been assigned a value in the corporate charter.
• Organization costs – Costs incurred in the formation of a corporation.
• Dividend – A corporation’s distribution of cash or stock to its stockholders on a pro rata (proportional) basis.
• Cash dividend – A pro rata distribution of cash to stockholders.
• Cumulative dividend – A feature of preferred stock entitling the stockholder to receive current and unpaid prior-year dividends before common stockholders receive dividends.
• Liquidating dividend – A dividend declared out of paid-in capital.
• Retained earnings – Net income that is retained in the corporation for future use.
• Declaration date – The date the board of directors formally declares a dividend and announces it to stockholders.
• Record date – The date when ownership of outstanding shares is determined for dividend purposes.
• Payment date – The date dividend checks are mailed to stockholders.
• Deficit – A debit balance in retained earnings.
• Earnings per share – The net income earned by each share of outstanding common stock.
• Prior period adjustment – The correction of an error in previously issued financial statements.