Scribd
Upload
9 views

Statement of Changes in Equity

Uploaded by

Jake Paras
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
9 views

Statement of Changes in Equity

Uploaded by

Jake Paras
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 16

STATEMENT OF CHANGES IN EQUITY

The statement of changes in equity shows the change in an


owner's or shareholder's equity throughout an accounting period.
Also called the statement of retained earnings, or statement of
owner's equity, it details the movement of reserves that make up
the shareholder's equity.
Equity is the value of an asset minus the value of all liabilities on
that asset.
When you have equity in a home, for example, your equity is the
difference between the home's fair market value and the
outstanding balance of your mortgage loan. The statement of
changes in equity is important because it offers key information
about equity reserves that can't be found anywhere else in
financial statements.
the main elements of statement of changes in equity
There are several elements to the statement of retained earnings
or statement of changes in equity.
Because you are tracking the movement of equity, you must look
at:
• Net profit or loss attributed to shareholders.
• A decrease or an increase in share capital reserves.
• The dividend payments made to shareholders.
• Any changes in accounting policy.
• Any corrections of prior period errors.
COMPANY NAME

Statement of Changes in Owners' Equity

For the month ended _______________________

Bella, Capital Edward, Capital Total

Beginning Capital Php Php Php

Drawings

Net Income (Loss)

Ending Capital Php Php Php


understanding the statement
To get started, you first want to know the opening balance of an
account because this represents the amount of shareholders'
equity reserves at the start of the reporting period.
It is important to understand that the opening balance is taken
from the prior period’s statement of financial position, which
means it is unadjusted.
Any necessary or suggested adjustments will be presented
separately in the statement of changes in equity; changes in
accounting policy and correction of prior period errors.
Next, it's important to check and see if there have been any
changes in accounting policy. The effects of any changes will be
reported in the classification.
Any prior period errors that have affected the equity must be
recorded as an adjustment to the opening reserves, not the
opening balance. This will allow the current period amounts to be
reconciled, and traced to prior period financial statements.
Now you will see the restated balance, which is the amount of the
stockholder’s equity after adjustments are made due to the types
of changes and corrections listed above.
other important sections of this statement

Now that you have the restated balance, there are some other
sections on the statement of changes in equity that are important
to know. The Changes in Share Capital explains whether or not
there was any further issuance of share capital during the
accounting period. This must be added to the statement of
changes in equity. Then the redemption of shares must be
deducted.
Any dividend payments for the current period must also be
deducted from shareholder equity because it is a distribution of
wealth to the stockholders.
Any stockholders' profits or losses should also be reported as
taken from the income statement.

Revaluation gains and losses in the statement of changes in equity


should also be included. However, any gains included in the
income statement due to a reversal of previous losses should not
be recorded separately. These will show up in the profit and loss
section for the accounting period.
Finally, you will see the closing balance, which is the balance of
the shareholders' equity reserves at the end of the accounting
period.
why this statement is important

The statement of changes in equity is important because it allows


analysts and reviewers of financial statements to see what factors
caused a change in owner’s equity during the accounting period.
You can find the movements of shareholder reserves on the
balance sheet. However, information detailing equity reserves is
not recorded separately in the other financial statements.
REFERENCE
• https://bizfluent.com/info-8481082-accounting-disclosure-
notes.html

You might also like