Which of the following is the correct order of accounts in the shareholders' equity section of the balance sheet?
A)Preference share capital,Ordinary share capital,Retained earnings
B)Retained earnings,Ordinary share capital,Preference share capital
C)Ordinary share capital,Preference share capital,Retained earnings
D)Ordinary share capital,Retained earnings,Preference share capital

Question

Quizplus · Accepted Answer

Generally, the order of accounts in the shareholders' equity section of the balance sheet is ordinary share capital, preference share capital, and retained earnings. This is because ordinary shares represent the ownership stake of common shareholders, followed by preference shares (if applicable) which have priority over ordinary shares in terms of dividend payments and liquidation preferences. Retained earnings represent the accumulated profits of the company that have not been paid out as dividends. Therefore, the correct order is C, which places ordinary share capital first, followed by preference share capital and retained earnings.

Which of the Following Is the Correct Order of Accounts