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1. Statement of Changes in Equity
Understanding Changes in Owner's
Equity

2. Learning Objectives
• Define Statement of Changes in Equity
• Identify the components
• Explain the purpose and importance
• Interpret a sample statement

3. Definition
• The Statement of Changes in Equity shows the
movement in equity accounts during a period.
• Includes owner contributions, profits/losses,
withdrawals/dividends, and other changes.

4. Purpose
• To provide transparency on equity movement
• Helps users understand how net income and
owner actions affect equity

5. Components
• Beginning Equity
• Additional Capital/Investment
• Net Income or Loss
• Withdrawals/Dividends
• Other Comprehensive Income
• Ending Equity

6. SHARE CAPITAL
• The amount invested by shareholders in
the company.

7. RETAINED EARNINGS
The accumulated profits or losses of the
company that have not been distributed
to shareholders.

9. Sample Format Table
• Particulars Amount (₱)
• ---------------------------------------------
• Beginning Capital 100,000
• Add: Additional Investment 20,000
• Add: Net Income 50,000
• Less: Withdrawals (10,000)
• Ending Capital 160,000

10. Example: Sole Proprietor
• • Juan started with ₱100,000
• • Invested another ₱20,000
• • Earned ₱50,000 net income
• • Withdrew ₱10,000 for personal use
• • Ending Equity: ₱160,000

11. Example: Corporation
• • Includes Share Capital, Retained Earnings,
Reserves
• • More complex with dividends and Other
Comprehensive Income (OCI)

12. Importance to Users
• For owners/investors: track returns
• For analysts: assess company stability
• For accountants: summarize changes in equity

13. Quick Review Questions
• What are the components?
• Why is the statement important?

14. Summary
• Equity changes reflect both performance and
owner actions
• Statement is a key part of financial reporting

15. Thank You!
• Questions and Answers

16. • Holland Law Firm is owned by Atty. Jude Holland.
The balance of Atty. Holland’s capital as of
January 1, 2015, is 1,800,000.00. During the
₱
year, he invested additional cash of 450,000.00
₱
in the business. Also, the Holland Law Firm
earned 168,750.00 of net income. Finally, he
₱
withdraws 112,500.00.
₱