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ACTPACO: Partnership and Corporation Accounting

Earnings per Share

Earnings per Share

 Amount attributable to every ordinary share outstanding during the period.


 Earnings per Share in formation pertains only to ordinary shares.
 It is not necessary to compute Earnings per Share for preference shares because there is a definite
rate of return for such shares.
 Computation formula is given as:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 =
𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Notes on Net Income

 The net income is equal to the amount after deducting dividends on preference shares.
 If preference share is cumulative, the preference dividend for the current year only is deducted
from the net income, whether such dividend is declared or not.
 If the preference share is non-cumulative, the preference dividend for the current year is
deducted from net income only if there is declaration.

Illustration


10% Cumulative Preference Share, ₱100 par, 10,000 shares outstanding
1,000,000
Ordinary Share, ₱100 par, 50,000 shares outstanding 5,000,000
Net Income 2,000,000

Computation:


Net Income
2,000,000
Less: Preference Dividend for the Current Year
100,000
10,000𝑠ℎ × ₱100 × 10%

Net Income to Ordinary Shares
1,900,000
Divided by: Outstanding Ordinary Shares 50,000

Earnings per Share
38

earnings-per-share
1