Statement of Changes in Equity
The statement of changes in equity is statement dated ’’FOR THE YEAR ENDED’’.
A reconciliation of the beginning and ending balances in a company’s equity
during a reporting period. It is not considered an essential part of the monthly
financial statements, and so is the most likely of all the financial statements not
to be issued. However, it is a common part of the annual financial statements.
The statement starts with the beginning equity balance, and then adds or
subtracts such items as profits and dividend payments to arrive at the ending
ending balance.
Statement of Changes in Equity, often referred to as Statement of Retained Earnings in
U.S. GAAP, details the change in owners' equity over an accounting period by presenting
the movement in reserves comprising the shareholders' equity.
Movement in shareholders' equity over an accounting period
comprises the following elements:
Net profit or loss during the accounting period attributable to shareholders
Increase or decrease in share capital reserves
Dividend payments to shareholders
Gains and losses recognized directly in equity
Effect of changes in accounting policies
Effect of correction of prior period error
The general calculation structure of the
statement is:
Beginning equity + Net income – Dividends +/- Other changes = Ending equity
Forms of Business Organization
SOLE PROPRIETORSHIP- A simplest form of business
organization. There is only one owner referred to as sole
proprietor. The business and the owner is one entity.
PARTNERSHIP- owned by two or more owners. It has a legal
personality separate from its owner.
CORPORATION- A corporation is owned by many owners called
stockholders or shareholders. Owners divided into common
stocks and preferred stocks.
Statement of Changes in Equity for Sole
Proprietorship
The Statement of Owner's Equity, which is prepared for the sole proprietorship
type of business, shows the movement in capital as a result of those four
elements.
Capital is increased by owner contributions and income, and decreased
by withdrawals and expenses. Strauss Printing Services
Statement of Owner's Equity
For the Year Ended December 31, 2019
Strauss, Capital – beginning $ 100,000
Add: Additional Contributions 10,000
Net Income 57,100
Total $ 167,100
Less: Strauss, Drawings 20,000
Strauss, Capital – ending $ 147,100
Statement of Changes in Equity for
Partnership:
The statement of partner’s capital is a financial report that shows the changes in
total partners’ capital accounts during an accounting period. In other words, it’s
a financial statement that reports the increases and decreases in the partners’
accounts over the course of a period.
Statement of Changes in Equity for
Corporation
The stockholders’ equity of a corporation is divided into two parts, namely, paid in capital and retained earnings.
Paid in capital composed of Capital Stock and
Additional Paid in Capital.
Capital Stock- reflects the Par value of the issued
Common shares.
Par Value- is the minimun price by which corporation
Can issue stocks to shareholders.
Additional Paid-in Capital – the excess of the issue
Price over the par reported. (Issue Price-Par)
FORMULA IN GETTING
SHAREHOLDERS EQUITY
Activity:
The Playdate Kiddie Gym is owned and
managed by Cris Roxas. The Balance of the Cris
Roxas is P765,430 and 857,430 on December 31
20X1 and December 31 20X2, Respectively. Net
Income for 20X2 is P115,465. Cris did not make
additional contribution to the business in 20X2.
Determine the balance of the Crix Roxas,
Drawings account on December 31,20X2.
