On the asset side, we add the proceeds to the cash. On the liability side, what do we do? Adding it to non distributed earnings doesn't seem fair. Is it? Thanks for your help on this existential question.

Agreed. But still, that doesn't seem right to me. It is not even a financing operation per se. So I can deleverage as much as I want, without even requiring equity financing? Am I the only one bothered here? Thanks for your reply @vincentt

Since, Asset = Liability + Equity Step 1: add cash to asset Step 2: add cash to equity (retained earnings to be specific) That way it would balance out.

A CFA Level 1 Discussion About How Do One Account For Warrants Emission In The Balance Sheet?

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This topic has 3 replies, 2 voices, and was last updated Jun-177:43 pm by vincentt.

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- huwabara
  Participant
  04 Jun 2017 at 6:44 pm
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  ::
  On the asset side, we add the proceeds to the cash. On the liability side, what do we do?
  
  Adding it to non distributed earnings doesn’t seem fair. Is it?
  
  Thanks for your help on this existential question.
- huwabara
  Participant
  04 Jun 2017 at 7:32 pm
  Up
  4
  ::
  Agreed. But still, that doesn’t seem right to me.
  
  It is not even a financing operation per se. So I can deleverage as much as I want, without even requiring equity financing?
  
  Am I the only one bothered here?
  
  Thanks for your reply @vincentt
- vincentt
  Participant
  - CFA Level 3
  04 Jun 2017 at 7:11 pm
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  1
  ::
  Since, Asset = Liability + Equity
  
  Step 1: add cash to asset
  Step 2: add cash to equity (retained earnings to be specific)
  
  That way it would balance out.
- vincentt
  Participant
  - CFA Level 3
  04 Jun 2017 at 7:43 pm
  Up
  1
  ::
  The following formula should help you understand better.
  
  RE = Beginning RE + Net Income – Dividends
  
  Apart from RE in the “Equity” section, there is also Common Stock.
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