12

NAME:__________________________________________
Kim Yessamin Madarcos
GRADE/SECTION:______________________________
12 Copernicus

FUNDAMENTALS
OF ACCOUNTANCY, BUSINESS
AND MANAGEMENT 2
Quarter I – Week 3
Preparation of the Statement of
Changes in Equity

CONTEXTUALIZED LEARNING ACTIVITY SHEETS

SCHOOLS DIVISION OF PUERTO PRINCESA CITY
Fundamentals of Accountancy, Business and Management 2 – Grade 12
Contextualized Learning Activity Sheets (CLAS)
Quarter I - Week 3: Preparation of the Statement of Changes in Equity
First Edition, 2021

Republic Act 8293, Section 176 states that: No copyright shall subsist in any work
of the Government of the Philippines. However, prior approval of the government agency or
office wherein the work is created shall be necessary for the exploitation of such work for a
profit. Such agency or office may, among other things, impose as a condition the payment
of royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names,
trademarks, etc.) included in this CLAS are owned by their respective copyright holders.
Every effort has been exerted to locate and seek permission to use these materials from
their respective copyright owners. The publisher and authors do not represent nor claim
ownership over them.

Published by the Schools Division of Puerto Princesa City

Development Team of the Contextualized Learning Activity Sheets

Writer: Shiela M. Caab
Content Editors: Marie Vic C. Velasco PhD
Language Editors: Ellen Grace Manzano
Proofreader: Andrea B. Adul
Reviewers: Marie Vic C. Velasco PhD

Illustrator: Shiela M. Caab

Layout Artist: Aileen A. Gonzalvo
Management Team:
Servillano A. Arzaga, CESO V, SDS
Loida P. Adornado PhD, ASDS
Cyril C. Serador PhD, CID Chief
Ronald S. Brillantes, EPS-LRMS Manager
Marie Vic C. Velasco PhD, EPS-Mathematics
Eva Joyce C. Presto, PDO II
Rhea Ann A. Navilla, Librarian II

Division Quality Assurance Team: Ronald S. Brillantes, Annielyn A. Lagan

Division of Puerto Princesa City-Learning Resource Management Section (LRMS)

Sta. Monica Heights, Brgy. Sta. Monica, Puerto Princesa City
Telephone No.: (048) 434 9438
Email Address: puertoprincesa@deped.gov.ph
 Lesson 1
Preparation of the Statement
of Changes in Equity

MELCS: Prepare Statement of Changes in Equity. ABM_FABM12-Ie-9

Objectives:
1. Identify the elements in the Statement of Changes in Equity.
2. Discuss the preparation of the Statement of Changes in Equity.
3. Prepare SCE for Single Proprietorship Business.

Let’s Try
Directions: Read each question carefully. Write the letter of the correct answer on the space
provided before the number.

_____1.
C What financial statement shows the changes in the owner’s personal account?
A. Statement of Cash Flow C. Statement of Changes in Equity
B. Statement of Comprehensive Income D. Statement of Financial Position

_____2.
C What is the residual interest in an asset of an enterprise after deducting its
liabilities?
A. Assets C. Equity
B. Capital D. Liabilities

_____3.
D What is the account used to decrease the owner’s personal account?
A. Income C. Profit
B. Investment D. Withdrawals

_____4.
B What account increases the capital account?
A. Expenses C. Loss
B. Investment D. Withdrawals

_____5.
A What comes next after preparing the SCE?
A. Statement of Cash Flow C. Statement of Changes in Equity
B. Statement of Comprehensive Income D. Statement of Financial Position

_____6.
D Which of the following does NOT directly affect the capital account?
A. Accumulated Depreciation C. Investment
B. Drawings D. Utilities Expense
_____7.
D The Following are true about the Statement of Changes in Equity EXCEPT?
A. Beginning Capital Balance plus Profit Equals Ending Capital Balance.
B. Beginning Capital Balance plus Profit Less Drawing equals ending capital
Balance.
C. Beginning Capital Balance plus Investment Less Drawing equals ending
capital balance.
D. Beginning Capital Balance Less Investment Add Drawing Equals Ending
Capital Balance.
1
_____8.
D Which is a TRUE statement?
A. Beginning Balance Less Additional Investment Less Profit and add
drawing equals Ending Capital.
B. Beginning Capital Balance plus additional investment plus loss less
drawing equals ending capital balance.
C. Ending Capital Balance plus additional investment plus loss less drawing
equals ending capital balance.
D. Ending Capital Balance plus drawings less additional Investment equals
beginning capital balance.

_____9.
D Which of the following is NOT TRUE?
A. The owner can invest and withdraw cash
B. The owner can invest and withdraw property of the business
C. The owner can invest and withdraw both cash and property of the
business.
D. The owner cannot withdraw property cash only.

_____10.
B Which of the following is TRUE?
A. Changes in equity shows the cash inflow and out flow.
B. Changes in Equity shows the decrease in owner’s investment.
C. Changes in equity shows Income and Expense of the business.
D. Changes in Equity shows the liquidity, solvency and profitability of the
company.

Let’s Explore and Discover

UNLOCKING Why do businessmen put up their business?

OF DIFFICULTY
a. Why do Accountant put up their own
Equity accounting and auditing firm? Instead of
As defined by the working in Corporation and government
conceptual agencies.
framework, Equity is
b. Why do Doctors put up their own clinics?
the residual interest
in an asset of an Instead of working in the hospital.
enterprise after c. Why do Lawyers build their law firms? Instead
deducting its
liabilities. of working in other’s law firm or in the public
attorney’s office.
The primary reason why businessmen put up their
business is to gain a profit, to make their thousands
into millions, depending on their goal.

2
STATEMENT OF CHANGES IN EQUITY
The statement of changes in equity summarizes the changes that occurred in owner’s
equity. The statement is now a required statement as per revised international accounting
standards (IAS) No. 1.
It tells the story about the owner’s personal account: Capital, Addition Investment,
Withdrawal of resources and the ending capital for the period.

Equity may Forms of Business Org. Equity Account

pertain to any of There is only one owner’s equity
A Sole Proprietorship account balance because there is
the following only one owner.
depending on
the forms of B Partnership Each partner has a separate equity
business account
organization: Owners’ equity or shareholders’
equity consist of share capital,
C corporation retained earnings and reserves
representing appropriations of
retained earnings among others.
How to Prepare the Statement of Changes in Equity for Single Proprietorship?
In the case of a Sole Proprietorship business, increases in owner’s equity arise from
additional investment by the owner and profit during the period. Decreases result from
withdrawals by the owner and from loss for the period.
The beginning balance and additional investment are taken from the owner’s capital
account in the general ledger.
The profit and loss figure comes directly from the income statement, while the withdrawals
come from the balance sheet columns in the worksheet. See sample below.
Owner’s Equity, Beginning (from Ledger)
+ Additional Investment (from ledger)
+ Profit (from Income Statement)
= Total Equity for the period
– Withdrawals for the period (Owner’s Drawing Account)
= Owner’s Equity for the period ended
Steps in Preparing the Statement of Changes in Equity

Heading. Includes company name, report name and the period

covered by the report. In SCE “For the period (span of time) Ended”
Report can be different from one period to another. A period can
me “For the month Ended”, For the Quarter Ended” or For the Year
Ended” depending on the coverage of the report

Beginning Capital balance, taken from the ending balance of

previous month or from the Post Closing Trial Balance.

Add Additional Investment if there is any, taken from Capital

ledger for the period.

3
 Also add the profit, taken from the SCI and if it is loss then deduct.
The profit is an important part of the changes in equity because it
shows the result of operation of the business.

Total is from Adding Beginning Capital to the Additional

Investment and Profit (taken from SCI)

Withdrawals or Owner’s Drawing is taken from the Owner’s

Drawing Ledger for the period. Deduct this one because it
decreases the capital balance. The owner can withdraw anything
he/she invested not only cash but also other assets like supplies or
equipment. It also means pulling out investment from the business
for personal use of the owner.

Ending Capital balance, taken by deducting withdrawals from the

total

Illustration

Belize CPA is owned by Ms. Bel Ize. (a) Ms. Ize’s Capital balance as of January 1, 2015 is
P300,000. Belize CPA make an (b) additional investment with in the year worth P 100,000
and earned a (c) net income of P 112,500. During 2015, she (d) withdraws P 75,000.

Belize CPA
Statement of Changes in Equity
For the Year Ended December 31, 2015

a Ms. Ize Capital, 01/01/2015 ₱ 300,000.00

b Add: Additional Investment ₱ 100,000.00
c Profit ₱ 112,500.00 ₱ 212,500.00
Total ₱ 512,500.00
d Less: Ms. Ize, Drawing -₱ 75,000.00
Ms, Ize Capital, 12/31/15 ₱ 437,500.00

The ending capital balance of the SCE will be useful in the preparation of the Statement of
Financial Position.

Other concerns;

a. The use of Peso sign is a necessity

b. Round off of amounts to two decimal places (.00)
c. Use of the double-rule in the ending capital balance.

(Source: Reymond Patrick P. Monfero, et al., Fundamentals of ABM 2-Teacher’s Guide. Quezon
City: Commission on Higher Education, 2016, 36-45.)

4
 Let’s Practice

Directions: Identify the elements of preparing the

ACTIVITY 1 SCE. Circle the number if the statement is included
in the preparation of SCE and “/” the number if the
statement it is excluded.

1. Add Additional Investment if there is any.

2. Deduct profit loss.
3. Put headings.
4. Deduct withdrawals.
5. Add Net Profit.
6. Beginning capital is different from additional investment.
7. Withdrew Supplies and equipment are excluded from withdrawals.
8. Profit loss can be excluded from the computation because it does not give any
value.
9. Ending capital can be taken from the deduction of withdrawals from beginning
capital if there is no profit and additional investment for the period.
10. Ending capital will be used in the preparation of the Statement of Financial
Position.

Directions: Fill in the missing amount. Compute for

the Ending Capital Balance of the following using the ACTIVITY 2
formula.

Beginning Additional Ending Capital

Profit/(Loss) (Drawings)
Capital Balance Investment Balance
P500,000 35,000 75,000 30,000 a. 580,000
P400,000 45,000 (65,000) b. 90,000 P 290,000
P300,000 58,000 c. 82,000 10,000 P 430,000
P200,000 d. 44,000 96,500 24,000 P316,500
P100,000 0 e.(13,000) 15,000 P72,000

The preparation of the statement of changes in equity is important to the business and the
owner.
AGREE _____ or DISAGREE _____ (Check your answer)

5
 Let’s Do More

Directions: Read and provide the answer below the

ACTIVITY 1 table.

To help tourists, visit Honda Bay islands, Ms. Nagales invested in a so-called
banca for hire and she invested 2 banca for tour passengers amounting to
P600,000. It will be used in different activities to transfer the tourists from one
island to another.

Below are the accounts balances of Ms. Nagales Banca for Hire services for the
month ended April 30, 2020.

Service Fee P 100,000

Taxes and Licenses 5,000
Repairs and Maintenance 10,000
Communication Expense 1,500
Salaries Expense 25,000
Allowance of Personnel 3,000
Insurance Expense 11,000
Ms. Nagales, Drawing 5,000

How much is the ending capital of Ms. Nagales for the month ended April 30,
2020? ________________
639,500 is the ending capital balance.

Directions: Using the information on the previous

activity, prepare a statement of changes in equity on the ACTIVITY 2
space below.

BANCA FOR HIRE

STATEMENT OF CHANGES IN EQUITY
FOR THE MONTH ENDED APRIL 30,2020

Ms. Nagales, Capital,Beggining. 600,000

Add: Profit 44,500
644,500
TOTAL:
Less: Ms.Nagales, Drawings 6,000
Ms. Nagales, Capital,April 30,2020 639,500
Why is it important to prepare the statement of changes in equity?

________________________________________________________________________________________
The statement of changes in equity is significant because it enables financial statement
analysts and reviewers to determine what causes contributed to a change in owner's equity during the
________________________________________________________________________________________
accounting period. The changes of shareholder reserves may be found on the balance sheet.

6
 Let’s Sum It Up
Descriptions: Describe the elements of the Statement of Changes in Equity by putting a
check to all statements that best describe it.

______1. Elements of SCE includes Investment, Profit and Withdrawals.

______2. Profit and Loss are important in the preparation of SCE.

______3. Additional Investment can be excluded if there is none.

______4. Ending Capital is taken after withdrawals.

______5. Losses and withdrawals decrease the equity.

Let’s Assess
Directions: Read each question carefully. Write the letter of the correct answer on the space
provided before the number.

_____1.
C What financial statement shows the changes in the owner’s personal account?
A. Statement of Cash Flow C. Statement of Changes in Equity
B. Statement of Comprehensive Income D. Statement of Financial Position

_____2.
C What is the residual interest in an asset of an enterprise after deducting its
liabilities?
A. Assets C. Equity
B. Capital D. Liabilities

_____3.
D What is the account used to decrease the owner’s personal account?
A. Income C. Profit
B. Investment D. Withdrawals

_____4.
B What account increases the capital account?
A. Expenses C. Loss
B. Investment D. Withdrawals

_____5.
A What comes next after preparing the SCE?
A. Statement of Cash Flow C. Statement of Changes in Equity
B. Statement of Comprehensive Income D. Statement of Financial Position

_____6.
D Which of the following does NOT directly affect the capital account?
A. Accumulated Depreciation C. Investment
B. Drawings D. Utilities Expense

7
_____7.
D The Following are true about the Statement of Changes in Equity EXCEPT?
A. Beginning Capital Balance plus Profit Equals Ending Capital Balance.
B. Beginning Capital Balance plus Profit Less Drawing equals ending capital
Balance.
C. Beginning Capital Balance plus Investment Less Drawing equals ending
capital balance.
D. Beginning Capital Balance Less Investment Add Drawing Equals Ending
Capital Balance.

_____8.
D Which is a TRUE statement?
A. Beginning Balance Less Additional Investment Less Profit and add
drawing equals Ending Capital.
B. Beginning Capital Balance plus additional investment plus loss less
drawing equals ending capital balance.
C. Ending Capital Balance plus additional investment plus loss less drawing
equals ending capital balance.
D. Ending Capital Balance plus drawings less additional Investment equals
beginning capital balance.

_____9.
D Which of the following is NOT TRUE?
A. The owner can invest and withdraw cash
B. The owner can invest and withdraw property of the business
C. The owner can invest and withdraw both cash and property of the
business
D. The owner cannot withdraw property cash only.

_____10.
B Which of the following is TRUE?
A. Changes in equity shows the cash inflow and out flow
B. Changes in Equity shows the decrease in owner’s investment
C. Changes in equity shows Income and Expense of the business
D. Changes in Equity shows the liquidity, solvency and profitability of the
company.

8
 Answer Key

Let’s Try
1. C 2. C 3. D 4. B 5. A 6. D 7. D 8. D 9. D 10. B

Let’s Practice
Activity 1: Activity 2
With circle:
1,2,3,4,5,6,9,10

With /:
7 and 8

Let’s Do More Activity 2

Activity 1
639, 500 is the ending
capital balance of Ms.
Nagales capital for the
month ended April 30,
2020.

Let’s Sum It Up
With Checks:
All

Let’s Assess
1.C 2. C 3. D 4. B 5. A 6. D 7. D 8. D 9. D 10. B

References
Teacher’s Guide

Monfero, Reymond Patrick P., Carlsberg S. Andres, Dani Rose C. Salazar, Christopher B.
Honorario. 2016. Fundamentals of ABM 2 Teacher’s Guide. Published by the
Commission on Higher Education.

9
FEEDBACK SLIP

A. FOR THE LEARNER

Thank you very much for using this CLAS. This learner’s
material is aimed at ensuring your worthwhile learning
through the help of your family members. For feedback YES NO
purposes, kindly answer the following questions:

1. Are you happy and contented with your learning

experiences using this CLAS?

2. Were you able to follow the processes and procedures

that were indicated in the different learning activities?

3. Were you guided by anybody from your family while

using this CLAS?

4. Was there any part of this CLAS that you found difficult?
If yes, please specify what it was and why.

B. FOR THE PARENTS / GUARDIANS

Do you have any suggestions or recommendations on
how we can make improvements to this CLAS to better serve
the learners?

Yes (Please indicate what this is/these are.)

None

Contact Number: __________________________________

NAME OF SCHOOL:

Teacher’s Name and Signature:

Parent’s / Guardian’s Name and Signature:

Date Received:

Date Returned:

10