Statement of Owners Equity


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Next lesson: Balance Sheet Example



The statement of owners equity is the second report of the financial statements. Its full name is the statement of changes in the owners equity.

This accounting report shows all the changes to the owners equity that have occurred during the period. These changes comprise capital, drawings and the profit for the period.

Just like the income statement, this statement normally covers a twelve-month period.



The format of the statement is shown below:

Statement of Owners Equity

As you can see, it shows the balances of the owners equity at the beginning and end of the period in addition to the changes that occurred during this period.

Here is the trial balance for George's Catering, the business we were using in previous examples:

Trial balance

In order to draw up the statement of changes in equity for George's Catering, we will take all items that affect the owners equity (the owner's share of the business) and put these in this new statement.

Drawings and capital will thus definitely be included here.

What about income and expenses? Well, the income and expenses have already been put in the income statement so as to calculate the profit or loss for the period. This overall profit or loss figure is now going to be transferred to the statement of changes in equity to calculate the closing balance of the owners equity.

The statement of changes in equity for George’s Catering is shown below:

Statement of Owners Equity

As you can see, the closing balance of the owner’s equity is the same as what we calculated in earlier sections:

The accounting equation

So that's the statement of owner's equity. In our next lesson you'll learn how the equity statement actually links up with the next accounting report, the balance sheet...



Previous lesson: Income Statement Example
Next lesson: Balance Sheet Example



Read Other Questions Relating to This Lesson
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Fill in the Blank Questions:
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Q: The summaries of balance sheet and income statement data follow. Beginning of year: Total assets $ 85,000 Total liabilities 62,000 …

Balance Sheet, Statement of Owner's Equity and Income Statement 
Q1: The three primary financial statements that we have seen so far are the Balance Sheet, Statement of Owner’s Equity, and the Income Statement. Please …

Partnership Accounting:
Drawing and Withdrawing
 
Q: What is the difference betweem Drawing and Withdrawing? As Drawing affects Capital Ownership. A: Same thing.

Equity - Distributed and Undistributed Profits 
Q: What is the share of undistributed profits? Do we have distributed profits? A: Yes, there is something called undistributed profits and …

How do I Find the Profit? 
Q: How do I find the profit for the year? And what if there isn't a profit but a loss?? A: The profit is shown at the bottom of the profit and loss …



Return from Statement of Owners Equity to Accounting Reports

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