STATEMENT OF
CHANGES IN EQUITY
STATEMENT OF CHANGES IN
OWNERS EQUITY
• Is a statement dates “for the year ended”
• The report shows a reconciliation of the
beginning and ending balances of the equity
accounts.
• It summarizes the equity transactions with
the owners of the business that occurred
during the year.
FORMS OF BUSINESS ORGANIZATION
• Sole Proprietorship
Is the simplest form of a business organization. There
is only one owner referred to as sole proprietor.
• Partnership
Is a business owned by two or more owners called
partners. A partnership has a legal personality
separate from its owners.
• Corporation
Is the most complex form of business organization. A
corporation is owned by many owners called
SOLE PROPRIETORSHIP
• The owner’s Capital accounts tracks the
following transactions of the owner:
1.Capital Contributions
2.Withdrawals
3.Net Income or Net Loss
ABC Company
Statement of Changes in Equity
For the period ended December 31, 20X1
Owner, Capital, January 1, 20X1 xxx
Add: Net Income xxx
Owner’s contribution xxx
Less: Drawings xxx
Owner’s, Capital, December 31, 20X1 xxx
Juana Dela Cruz us the owner of the Friendly
Convenience Store. The store was established on
January 1, 20X0. Juana deposited 10,000 to a bank
account in the name of Friendly Convenience Store.
She made three more deposits of 2,500 each
during the year from her personal account. The
store generated net income of 35,670 in 20X0.
Juana regularly withdraws 1,000 per month from
the store’s bank account for her personal expenses.
Prepare a Statement of Changes in Equity for the
year ended December 31, 20X0.
PARTNERSHIP
• A partnership is owned by two or more partners.
• The objective of the SoCE is to account for the
equity of each partner. Therefore, there are more
than one capital account.
• Net income is allocated based on the profit and
loss sharing agreement stipulated in the
partnership contract.
• Allocation of net income is unique only to
ABC Partnership
Statement of Changes in Equity
For the period ended December 31, 20X1
Partner Partner Partner Total
A, B, C,
Capital Capital Capital
Balance, Jan 1, 20X1 xxx xxx xxx xxx
Add: Net income xxx xxx xxx xxx
Partner’s Contribution xxx xxx xxx xxx
Less: Drawings xxx xxx xxx xxx
Balance, Dec 31, 20X1 xxx xxx xxx xxx
The DEF Partnership was established in 20X0. The
partners, Diana, Emina and Fanny have January 1, 20X1
capital balances of 25,600, 43,800 and 37,655
respectively. Diana contributed 15,000 during 20X1.
Emina and Fanny also contributed 10,000 each in 20X1.
The 20X1 year end balances of each partner’s Drawings
account are as follows: Diana 12,000, Emina 15,000 and
Fanny 14,000.
The partnership reported 20X1 net income of 75,650.
According to the partnership agreement, the partner’s
profit sharing ratio is 30%, 40% and 30% for Diana,
Emina and Fanny.
On February 15, 20X1, Evelyn Ferrer opened Cookie
Fantasy Bakeshop. She invested 75,000 to purchase an
oven and bakery supplies. The business generated a
net income of 37,545 in 20X1. Moreover, Evelyn used
15,000 from the account of Cookie Fantasy to pay the
electricity and phone bills of her house.
Evelyn invested an additional 13,400 and 17,650 on
March 16, 20X2 and August 19, 20X2, respectively. Net
income for 20X2 was reported at 48,950. Evelyn’s
Drawings account has a balance of 20,000 on
December 31, 20X2.
Required: Prepare Cookie Fantasy Bakeshop’s
