What Are The Two Sources Of Stockholders' Equity?

The two basic sources of stockholders’ equity are:

• Contributed Capital
• Retained Earnings

i. Contributed Capital:

One of the two main sources of stockholders’ equity is contributed capital. Contributed Capital is the money brought into the business by selling stock in the company. These funds are often the initial source of stockholders’ equity. When more stocks are sold, the firm’s stockholders’ equity increases.

ii. Retained Earnings:

Retained Earnings are the other main source of stockholders’ equity. Retained earnings are the accumulated amount of all net income since the organization of the corporation. Retained earnings are a reflection of how successful a company has operated over time.

iii. Conclusions:

Thus, the two main sources of stockholders’ equity are Contributed Capital and Retained Earnings.