Statement of Changes in Equity Format Example

This is the seventh step of the Steps in the Accounting Cycle.

Statement Of Owner's Equity Definition Or Meaning:

It is the summary of changes in the Shareholders’ Equity over the period of time. It is wider financial statements than Statement of Retained Earnings. We also called this as "Statement of Owner's Equity" or "Statement of Movements in Equity".

Components of Statement of Owner's Equity

Opening Equity is the Opening Balance from the previous year’s Financial Statements.

+ Retained Earnings: is the income retained in the company businesses. It is calculated by preparing Statement of Retained Earnings.

             To Find Retained Earnings, we use the following Retained Earnings Equation or Formula:

Retained Earnings Equation / Components

Opening Retained Earnings + Net Income (-Net Loss) for the year - Dividend (It is the profit paid out of the profits of the company businesses, so it is deducted from the opening balance.) = Closing Retained Earnings / Retained Loss

+Share Capital: Issuance of share capital is added to opening equity.

 + Share Premium: Premium on issue of shares is the profit for the shareholders and added to opening balance.

-Transfer to Capital Reserves: Some portion of profit is transferred to capital reserves for long term financing purposes, so it is deducted from the point view of company businesses.

-Retained Loss: It is the loss retained by the company businesses for the accounting period

Closing Equity (Balance Value): It is the net final valued after adding and deducting above components.

Purpose of Statement of Changes In Equity

To show changes in equity and show how the funds are utilized for investments and shows the performance of management in utilizing those funds for the profitable activities of the business.

In the last, we can say that Statement of Changes in Equity or Statement of Stockholders Equity is helpful in presenting the changes in the opening and closing Equity.