Then come the entries that show equity. Typically, the equity entries are labeled common stock and/or paid-in capital, which includes all the money that shareholders have invested in the company, and retained earnings, which is all the accumulated profits the company has earned that it has never paid out to shareholders. Bill and Carolyn don’t have any retained earnings yet, so their equity is wholly in the form of stock. The $205,000 represents the cash they themselves invested to buy stock in their new company.
