The YouTube source discusses Equity and its components in relation to revenue recognition and expenses, outlining how these fundamental accounting elements are interconnected.

**Definition and Basic Impact on Equity**

The source explains that recording expenses decreases net income, and since net income ultimately affects retained earnings, which is a component of equity, expenses consequently reduce equity. Conversely, revenues increase net income and therefore increase equity. The balance sheet, or statement of financial position, reflects the balances of asset, liability, and equity accounts at a specific point in time.

**Components of Equity**

The source details several components of equity, particularly within the context of shareholding companies:

*   **Common Stock (الاسهم العادية)**: This is the basic ownership interest in a corporation. It represents the par value of the shares issued. Common stockholders are usually the true owners, have voting rights, and are the last to receive any remaining assets in case of liquidation.
*   **Preferred Stock (الاسهم الممتازة)**: This is another class of stock that typically has a fixed dividend rate and priority over common stock in dividend distribution and liquidation. Preferred stockholders usually do not have voting rights. Different types of preferred stock are mentioned, including:
    *   **Convertible Preferred Stock (اسهم ممتازة يمكن تحويلها)**: Can be converted into common stock.
    *   **Callable Preferred Stock (اسهم ممتازة قابلة للاستدعاء)**: The issuing company can repurchase these shares.
    *   **Participating Preferred Stock (اسهم ممتازة قابلة للمشاركة)**: Allows preferred stockholders to receive additional dividends beyond their stated rate if the company's profits exceed a certain level.
    *   **Cumulative Preferred Stock (اسهم ممتازة مجمعة للارباح)**: If dividends are not paid in a particular year, they accumulate and must be paid in full before any dividends can be paid to common stockholders.
*   **Additional Paid-in Capital (علاوة الاصدار)**: Represents the excess of the selling price of shares over their par value. When shares are issued, the cash received is debited, the par value of the shares is credited to Common Stock (or Preferred Stock), and any excess is credited to Additional Paid-in Capital.
*   **Retained Earnings (الارباح المحتجزة)**: Represents the accumulated profits of the company that have not been distributed as dividends. It is affected by net income (Revenues - Expenses) and dividend distributions. Retained earnings can be further classified as:
    *   **Unappropriated (Free) Retained Earnings (ارباح محتجزة غير مقيدة)**: Available for dividend distribution.
    *   **Appropriated (Restricted) Retained Earnings (ارباح محتجزة مقيدة)**: Earnings that have been set aside for specific purposes, such as legal reserves or capital expansion. The appropriation is recorded by transferring an amount from unappropriated retained earnings to an appropriated retained earnings account.
*   **Treasury Stock (اسهم الخزينة)**: Represents shares of the company's own stock that have been reacquired but not retired. Treasury stock reduces total equity and is shown as a contra-equity account (a negative balance in the equity section). Reasons for repurchasing shares include supporting the market price, improving earnings per share, and having shares available for employee stock options or stock dividends. Treasury shares do not receive dividends and have no voting rights.
*   **Other Comprehensive Income (OCI) (الدخل الشامل الاخر)**: Includes certain revenues, expenses, gains, and losses that are excluded from net income under accounting standards and are reported as a separate component of equity. An example mentioned is unrealized gains or losses on available-for-sale securities. OCI has a balance that accumulates over time.

**Relationship with Revenue and Expense Recognition**

The source explicitly states that net income, which is calculated by subtracting total expenses from total revenues, directly impacts retained earnings, a key component of equity.

*   **Revenue Recognition:** When revenue is recognised according to the principles discussed earlier (satisfying performance obligations), it increases the company's net income, which ultimately leads to an increase in retained earnings and, consequently, total equity.
*   **Expense Recognition:** Conversely, when expenses are recognised (matched with revenues, systematically allocated, or recognised immediately), they decrease the company's net income, leading to a decrease in retained earnings and total equity. The source emphasises the **matching principle**, where expenses incurred to generate revenue are recognised in the same period as the revenue, ensuring an accurate measure of income which flows into retained earnings.

**Specific Equity Transactions**

*   **Issuance of Stock:** When a company issues shares, it receives cash (an asset) and increases its equity through Common Stock (at par value) and Additional Paid-in Capital (for the excess over par).
*   **Stock Dividends (توزيعات الارباح في شكل اسهم)**: Instead of cash, a company can distribute additional shares to its existing shareholders. This is a reclassification within equity, as retained earnings are reduced and Common Stock and potentially Additional Paid-in Capital are increased. The accounting treatment depends on whether it is a **small stock dividend** (less than 20-25% of outstanding shares) or a **large stock dividend** (more than 20-25%). Small stock dividends are accounted for at fair market value, while large stock dividends are accounted for at par value. The source highlights that a stock dividend does not affect total equity, only reclassifies amounts within equity accounts.
*   **Cash Dividends (توزيعات الارباح النقدية)**: When a company declares and pays cash dividends, retained earnings are reduced, and a liability (Dividends Payable) is recognised on the declaration date, which is then settled by a decrease in cash on the payment date. Cash dividends directly reduce equity.
*   **Stock Splits (تجزئة الاسهم)**: Involves increasing the number of outstanding shares and proportionally reducing the par value per share. The market price per share typically decreases, making the stock more accessible to a wider range of investors. A stock split does not affect the total value of equity or any specific equity accounts; it only changes the number of shares outstanding and the par value per share. A **reverse stock split (عكس تجزئة الاسهم)** has the opposite effect, reducing the number of outstanding shares and increasing the par value per share. These are usually recorded with a memorandum entry.

**Other Points on Equity**

*   The source mentions that losses, similar to expenses, decrease equity but arise from peripheral or incidental transactions rather than ongoing operations.
*   The concept of **book value per share (القيمة الدفترية للسهم)** is briefly explained as the total equity attributable to common shareholders divided by the number of outstanding common shares.

In summary, the sources provide a comprehensive overview of equity and its various components. Equity is directly impacted by revenue recognition (increasing it) and expense recognition (decreasing it) through the resulting net income or loss. Transactions such as stock issuance, dividends, and treasury stock also significantly affect the balances within the equity section of the balance sheet. Stock splits and reverse stock splits alter the number of shares and par value but do not change the total equity. Other Comprehensive Income represents adjustments to equity that bypass the income statement.