In short
A stock split increases the number of shares outstanding and reduces the par value per share proportionately, without changing total equity or any equity account balance.
Key takeaways
- No journal entry is needed, other than a memorandum note of the new share count and par value.
- Large stock dividends, by contrast, move par value from retained earnings to common stock.
- Earnings per share for all periods presented are restated for the split.
Where it's tested
FAR: Equity & Earnings Per Share — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company declares a 2-for-1 stock split in November. How does this affect the weighted-average share calculation for EPS?