SCE

STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CHANGES IN EQUITY
❖All changes, whether increases or
decreases to the owner’s interest on the
company during the period are reported here.
❖This statement is prepared prior to
preparation of the Statement of Financial
Position (SFP) to be able to obtain the
ending balance of the equity to be used in
the SFP.
• SINGLE/SOLE PROPRIETORSHIP –An entity whose
assets, liabilities, income and expenses are centered
or owned by only one person

• PARTNERSHIP – An entity whose assets, liabilities,

income and expenses are centered or owned by two
or more persons

• CORPORATION – An entity whose assets, liabilities,

income and expenses are centered or owned by itself
being a legally separate entity from its owners.
Owners are called shareholders or stockholders of the
company
 Heading

Increases
to Equity

Decrease
s to
Equity
PARTS OF THE SCE
A. Heading
1. Name of the Company
2. Name of the Statement
3. Date of Preparation (“For the Year Ended”)
B. Beginning Balance
C. Increases to Equity
1. Net Income for the Year 2. Additional Investments
D. Decreases to Equity
1. Net Loss for the Year 2. Withdrawals/ Income Distribution
E. Ending Balance
TERMS to REMEMBER
• Initial Investment – Beginning balance; the very first
investment
of the owner to the company.
• Additional Investment – Increases to owner’s equity by adding
investments by the owner
• Withdrawals –Decreases to owner’s equity by withdrawing
assets
by the owner
• Distribution of Income – When a company is organized as a
corporation, owners (called shareholders) do not decrease
equity by way of withdrawal. Instead, the corporation
distributes the income to the hareholders based on the shares
SCE : Partnership
VARIATIONS TO THE SCE
The Statement of Changes in Partners' Equity
There are 2 or more owners in a partnership thus,
the
changes in the capital account of each partner is
presented
VARIATIONS TO THE SCE
The Statement of Changes in Shareholders' Equity
✔ Since there unlimited number of shareholders,
the names are not indicated here. Instead, the
corporation keeps an official list with the
corporate secretary
✔ Instead of additional investment, share
issuances increases the share capital of a
corporation
✔ Instead of withdrawals, distribution of net
income to shareholders decreases the capital
of the corporation
Sample Problem
• Owner, Jon invested an initial capital of P50,
000 in order to put up his janitorial services
company. During the first year of operations
(2016), the company had a loss of P25,000.
Because of this, Jon invested additional capital
of P50,000 in 2017. The company had a net
income of P100,000 and Jon withdrew P10,000
for personal use in 2017. Compute for the
ending capital balance of Jon for the year 2017.
SOLUTION:

JON JANITORIAL SERVICES

Statement of Changes in Equity
For the year ended, December 31, 2017

Beginning Capital PhP 25,000 2016’s initial

Add: Net Income 100,000 investment of
Additional Investment 50,000 PhP50,000 less
Subtotal PhP175,000 that years net
loss of PhP25,
Less: Withdrawals 10,000 000

Ending Capital PhP165,000