A stock split does not affect the total value of any of the equity accounts. It only increases the number of shares outstanding and reduces the par value per share, resulting in a lower market price per share. This does not change the overall value of the company, so the total value of equity accounts remains the same.

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A Stock Split

Question 21

Multiple Choice

A stock split:

A) increases the total value of the ordinary equity account.
B) decreases the value of the retained earnings account.
C) does not affect the total value of any of the equity accounts.
D) increases the value of the additional paid in capital account.
E) decreases the total owners' equity on the statement of ﬁnancial position.

Correct Answer: