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Week 4| Day 21 to Day 25

Fundamentals of Accountancy
Business & Management 2
Quarter 1 – Module 4:
Statement of Changes in Equity

SELF-LEARNING MODULE

DIVISION OF GENERAL SANTOS CITY

Subject Area – Fundamentals of Accountancy Business & Management
Self-Learning Module (SLM)
Quarter 1 – Module 4: Title: Statement of Changes in Equity
First Edition, 2020

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Editors:
Reviewers: Dr. Luzviminda Loreno
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 12

Week 4 | Day 21 to Day 25

Fundamentals of Accountancy
Business & Management
Quarter 1 – Module 4:
Statement of Changes in Equity

SELF-LEARNING MODULE

DIVISION OF GENERAL SANTOS CITY

Introductory Message
For the facilitator:

Welcome to the Fundamentals of Accountancy, Business & Management 2

Grade 12, Self-Learning Module (SLM) on Statement of Changes in Equity (SCE) !

This module was collaboratively designed, developed and reviewed by

educators both from public and private institutions to assist you, the teacher or
facilitator in helping the learners meet the standards set by the K to 12 Curriculum
while overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and
independent learning activities at their own pace and time. Furthermore, this also
aims to help learners acquire the needed 21st century skills while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

2
For the learner:

Welcome to the Fundamentals of Accountancy, Business & Management 2 -

Grade Level 12 Self-Learning Module (SLM) on Statement of Changes in Equity !
(SCE). This is the 3rd module following the modules on the Statement of Financial
Position (SFP) and Statement of Comprehensive Income (SCI).

The hand is one of the most symbolized part of the human body. It is often used
to depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a learner
is capable and empowered to successfully achieve the relevant competencies and
skills at your own pace and time. Your academic success lies in your own hands!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning resource while being an active
learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the

lesson. This aims to help you discover and
understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process
what you learned from the lesson.

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 What I Can Do This section provides an activity which will
help you transfer your new knowledge or skill
into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do
not hesitate to consult your teacher or facilitator. Always bear in mind that you
are not alone.

We hope that through this material, you will experience meaningful

learning and gain deep understanding of the relevant competencies. You can do
it!

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 What I Need to Know

This module was designed and written with you in mind. It is here to help
you master the Statement of Changes in Equity (SCE).
The scope of this module permits it to be used in many different learning
situations. The language used recognizes the diverse vocabulary level of students.
The lessons are arranged to follow the standard sequence of the course,
Fundamentals of Accountancy, Business and Management 2 (FABM 2) in preparing
a Statement of Changes in Equity (SCE) for a single proprietorship (ABM_FABM12-Ie-
9). But the order in which you read them can be changed to correspond with the
textbook you are now using.

The module is divided into two lessons, namely:

• Lesson 1 – The Forms of Business Organization
• Lesson 2 – Statement of Changes in Equity

After going through this module, you are expected to:

Prepare a Statement of Statement of Changes in Equity for a single

proprietorship.

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 What I Know

In accounting the financial statements are the means to communicate the well
being of the company to its stakeholders, right? That is why we take to heart the
preparation of a Financial Statement. Now its time we explore the forms of business
organizations and the Statement of Changes in Equity (SCE) . But first, let’s check what
you know of these topics ok? Choose the answer from the choices given & write it on
the blank provided for.

Instruction: Choose the letter of your choice and write it on the blank.

1. ___________Which form of business organization puts the least risk on its owners?
a. single proprietorship b. corporation c.partnership d. assets
2. ___________Which form of business organization is owned by only one person?
a. single proprietorship b. corporation c.partnership d. institution
3. ___________Which business is formed by two or more persons contributing
money, or property, or industry?
a. single proprietorship b. corporation c.partnership d.cooperative
4. ___________Which financial statement focus on equity?
a. Statement of Fin. Condition b. Statement of Comp. Income
c. Statement of Changes in Equity d. Cash Flow
5. ___________ Which element in the Statement of Changes in Equity (SCE) increases
in owner’s equity without the need for additional investment?
a. Drawings b. Income c. Beginning Capital d. losses
6. ___________ What decreases owner’s equity due to poor business operation?
a.Drawings b. Income c. Beginning Capital d. losses
7. ___________ Which SCE is used by a corporation?
a. Statement of Changes in Equity (SCE) Single Proprietorship
b. SCE in Partnership c. SCE in Corporation d. Cash flow
8. ___________ What decreases owner’s equity apart from net effect of revenues and
expenses? a. Drawings b. Income c. Beginning Capital d. losses
9. ___________ What type of SCE is prepared for for a single proprietorship?
a. Statement of Changes in Equity Single Proprietorship b. SCE in
Partnership c. SCE in Corporation d. Cash flow
10. ___________ Which advantage in the single proprietorship allows it to be the choice
of many businesses except. a. Easy to put up b. freedom of
management c. small capital d. large capitalization
11. ___________ Which disadvantage in the partnership that causes it risky for
investment? a.income b. camaraderie c. unlimited liability
d. large investment
12. ___________ What advantage of a corporation addresses risk of investment?
a. Liability is up to investment only b. limited cash inflows c. large
capital d. portability of capital
13. ___________ What is the advantage of a corporation that makes it the choice of
many businesses except?
a. Limited risk b. legal personality c.easy to raise capital d. limited life
14. ___________ What is the difference between SCE of partnership and single
proprietorship in terms of net income?
a. beg investment b. income c. division of income d.drawing method
15. ___________ How does a corporation distribute its income?
a. Cash flow b. dividend c. Retained earnings d. shares

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 Lesson
Forms of Business
4a Organization

What’s In ?
Looking back, the previous 2 modules, introduced two (2) major Financial
Statements, the Statement of Financial Position and the Statement of Comprehensive
Income. In this module we will explore the third financial statement, the Statement
of Changes in Equity. But first, a swift look back.

Quick Check
Instruction: Classify the account titles based on choices from a-d.
Write the letter of the correct answer in the space provided for.

For items 1-5 identify which financial statement do the following

account titles belong to:

a. Balance Sheet b. Income Statement c. cash flow d. Both a & b

1. ___ Prepaid Expense
2. ___ Accrued Rent Payable
3. ___ Insurance Expense
4. ___ Sales Returns & Allowance
5. ___ Purchases
For items 6-10 identify which type of expense they belong.

a. Cost of goods sold c. General & Administrative Expenses

b. Selling/Marketing Expenses d. Other Expenses
6. ___ Purchases
7. ___ Freight in
8. ___ Freight out
9. ___ Salesmen’s Commission
10. ___ Interest Expenses
Well done you remembered well !

What’s New ?
As a student of business most of us are fascinated at how huge and
successful some companies have grown to be. While, we are aware at the risks
involved, we are also excited of the opportunities available.
Are you interested to go into business?

7
Read the case and answer the given questions on the space provided:
Activity 1: Buko Pie Queen
Kristel, a grade 11 student is interested to go online selling business. Why
not? She has a good product, buko pie. Initially, she found success with her
buko pie around her neighborhood in Purok Malakas. Selling her pies at P150.00
pesos each, she is grossing at P3,000 daily sales (20 pcs) earning a tidy profit of
800.00 per day in the 1st month, with her P5,000 initial capital. To increase her
sales, she registered with Food Panda. As demand rose, she bought a bigger oven
with bigger capacity on credit at Php120,000.00 with a monthly payment of
P24,000.00 for six months. Sales rose to P4,500 per day on the first week, but as
Extended community quarantine was lifted to make way for Gen Community
Quarantine sales fell to P3,000.00 daily. She found she could hardly make her
monthly payment. With her limited capitalization, she feels helpless. A close
friend, Allan offered to invest in her business with P100,000 for a 50-50 stake as
a partner. Should she accept?
1. Are problems to be expected in a business? Should she give up?

__________________________________________________________________
2. What is the form of business organization of Kristel’s business?
Did it contribute to its difficulties? ______________________________

__________________________________________________________________

3. Should she say yes to Allan’s offer? _____________________________

_________________________________________________________________
4. Are there disadvantages in having a business partner? __________

_________________________________________________________________

5. What is the ideal form of business organization for her? Why?

What is It
__________________________________________________________________

The concept of business organization

Business has its joys and pains. When opportunities are available, risks
go with it as well. In the case of Kristel, she bears the burden of costly decisions
alone, as a sole proprietor. The personal assets of the owner not devoted to the
business is put at risk when the owner makes a bad decision of getting into debt
that the business is unable to pay. But there are good reasons for going solo too,
like freedom to manage it as you like it. Decisions are easier to make so
opportunities are easily addressed. Will Kristel accept the proposal of Allan? It
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will increase the capital of her business, thus help in terms of resources and
manpower she desperately needs, but is she willing to give up the profits she is
 The Business Organization
A business is defined as an organization or enterprising entity engaged in
commercial, industrial, or professional activities. The term business also refers to
the organized efforts and activities of individuals to produce and sell goods and
services for profit.The organization is the structure that holds the business entity
together.

The 3 Forms of Business Organization

Basically there are three (3) major forms of business organizations. All other
forms of business are similar in some respects to these three basic forms:
a. SINGLE/SOLE PROPRIETORSHIP –A form of business whose assets,
liabilities, income and expenses are owned by only one person (Price,
Haddock & Brock, 2012).

Advantages of the Sole Proprietorship

1. Owners can establish a sole proprietorship instantly, easily, and

inexpensively.
2. Sole proprietorship carry little, if any, ongoing formalities.

3. A sole proprietor need not pay unemployment tax on himself or

herself (although he or she must pay unemployment tax on
employees).
4. Owners may freely mix business and personal assets

Disadvantages of the Sole Proprietorship

1. Owners are subject to unlimited personal liability for the

debts, losses, and liabilities of the business.
2. Owners cannot raise capital by selling an interest in the
business.
9 rarely survive the death or incapacity
3. Sole proprietorship
of their owners and so do not retain value.
5. Partnerships often do not have to pay minimum taxes that are required of
corporations.

Disadvantages of the Partnership

1. All owners are subject to unlimited personal liability for the debts, losses,
and liabilities of the business (except in the cases of limited partnerships
and limited liability partnerships).
2. Individual partners bear responsibility for the actions of other partners.
3. Poorly organized partnerships and oral partnerships can lead to disputes
among owners.

NO …..ITS NOT IN
Corporate Headquarters
THE SIZE OF THE
DREAM, its in how
determined you are!

c. CORPORATION – is a form of business organization whose assets,

liabilities, income and expenses are owned by itself being a legally
separate entity from its owners. As a legal entity, it can sue or be sued as
well as own properties and transact business. Owners are called
shareholders or stockholders of the company (Haddock, Price, & Farina,
2012).

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Advantages of the Corporation

1. Owners are protected from personal liability for company

debts and obligations.
2. Corporations have a reliable body of legal precedent to
guide owners and managers.
3. Corporations are the best vehicle for eventual public
companies.
4. Corporations can more easily raise capital through the
sale of securities.
5. Corporations can easily transfer ownership through the
transfer of securities.
6. Corporations can have an unlimited life.
7. Corporations can create tax benefits under certain
circumstances, but note that C corporations may be
subject to "double taxation" on profits.

Disadvantages of the Corporation

1. Corporations require annual meetings and require

owners and directors to observe certain formalities.
2. Corporations are more expensive to set up than
partnerships or sole proprietorship.
3. Corporations require annual fees and periodic filings
with the state.

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 What’s More
Let’s try this! Suggest a business for each type of organization & tell us
why. Write your answer in the box provided.
Activity 2 : Make your own business

TYPE OF BUSINESS PROPOSED YOUR REASON WHY

activity
ORGANIZATION BUSINESS

Single Proprietorship

Partnership

Corporation

What I Have Learned

1. Businesses are basically of three three types, Single proprietorship,

Partnership, and Corporation.
2. The Single proprietorship is easy to create, but is usually limited in
capitalization, and all risk is borne by the single proprietorship.
3. Partnership is created by contract among members.
4. A common fund is created in partnership where one partner may contribute,
money, property or industry.
5. In partnership all partners can be bound by the action of others.
6. The corporation has a juridical personality, and can enter into transaction
like an ordinary person.
7. Because of the divisibility of capitalization, corporations can harness big
capital , hence engage in bigger businesses, and has opportunity for bigger
growth.

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 What I Can Do

QUICK CHECK
Now, let us apply what we know:

A. Instruction: Write the answer in the space provided for. Name the ideal form of
business organization suited to the investment goals of the owner for the following:

______________________ 1. For small businesses like kakanin delivery, that are

easy to start and require small capital, although
unfortunately produce limited profit.
______________________ 2. The type of business that provide expertise to clients
like auditing firms, law firms.
______________________ 3. Businesses in growing industry but requires large
capitalization like canning, mall, factory.

______________________ 4. Business you want to invest in but you have no time

to get involved in its day to day operations. And
most importantly, you don’t want to risk your
personal assets.
______________________ 5. Business that you want absolute control, and no
meddling from others.

1. Single proprietorship 2.Partnership 3. corporation 4. corporation 5. corporation

Did you get it?

Go over the topics and put a (/) to describe your understanding of the topic.

Forms of
Business
Organizations Yup, I Hmmm Yes,
Nope,I did not
understood but I have questions
understand at all
it well

Sole Proprietorship

Partnership

Corporation

Assessment

13
Lesson
Statement of Changes in
4b Equity
What I Know
Now that you have learned about the 3 basic types of business you are now
ready for the Statement of Changes in Equity. Let’s do this guys!

Activity 3 : What is my Equity?

So what’s
Do you want to know how much is your family equity? Yes
Equity
dude, you have a family equity and its so simple to do.
again?
Remember your accounting equation? Let’s put it to use:
The Accounting Equation for Capital or equity is C= A-L
where C is for capital, A is for asset, and L is for liabilities.

What to do:

1. List down the assets or properties of your family.

Okay, ! Got it ! (Everything of financial value that the business or
your family owns, such as money, appliances etc..)
2. Now total the value of all your assets or properties to
get your Total Assets
3. Next,list down then total all debts of your family or
liabilities or “utang” to get your Total Liabilities
4. From the Total Assets minus or deduct the amount of
Total Liabilities. Yup you’re through, duh! That easy!

The answer is your household’s ownership, or your

owner’s equity. In business, owners will try to grow and
watch over this part of the business. How about you? Can
you help improve your family equity? List your plans to
improve your family equity?
________________________________________________________
________________________________________________________

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So what is Statement of Changes In Equity (SCE) ?

Statement of Changes in Equity. Is a Financial Statement that

presents/shows all changes, to the owner’s capitalization whether increases or

decreases during the period reported.

It 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. (Haddock, et al., 2012).

Elements of a Statement of Changes in Equity:

a. Initial Investment – The very first investment of the owner to the company

in order to start the business operations. Investments can be made in the form

of cash, or other assets whether current assets like merchandise inventory or

any non current assets like land, or building.

b. Additional Investment – Increases to owner’s equity by adding the newer

investments made by the owner to the business.

c. Distribution of Income – The income of the single proprietorship is within

the discretion of the owner, which he may or may not get from the business. If

he does, he may just use it through the Owner’s Drawing. In a partnership,

partners have agreements on how income or loss is divided among themselves.

Dividends is the means the corporation distributes the income to the

shareholders based on the shares that they have (percentage of ownership of

the company). This reduces the cash of the company, hence is a deduction from

stockholders’ equity .

d. Net Income/Loss - The result of operations of the business could either be

an income or a loss. The income is added while the loss is a deduction of the

equity.

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e. Drawings - Personal use of the assets of the business such as cash is also

a deduction to the capital of the owner of the business.

llustrative Sample of a Statement of Changes in Equity :

Davao Central Convenience Store

Statement of Changes in Equity
For the year ended December 31, 2016

Mr. Davao Capital as of January 1, 2016 Php 75,000.00

Add: Additional Investment in Ownership Php 25,000.00
Net Income for the year 2016 150,000.00 175,000.00
Total 250,000.00
Less: Mr. Davao Withdrawals 150,000.00
Mr. Davao Capital as of December 31, 2016 Php 100,000.00

1. Parts of the Statement of Changes in Equity:

Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for the”)
a. Initial Investment
b. Increases to Equity
i. Additional Investment
ii. Net Income
c.Decreases to Equity
i. Net loss for the year
ii. Withdrawals by the owner

Variations in the Statement of Changes in Owner’s Equity:

BusOrganization Ownership Statement of Changes in Equity

Single Proprietorship Sole Proprietor Statement of Changes in Owner’s Equity

Partnership Partners Statement of Changes in Partners’ Equity

Corporation Shareholder Statement of Changes in Shareholders

Equity

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a. Statement of Changes in Owner’s Equity
This statement reflects the movement and changes of the capital of the
single proprietor in the year of operation.
b. The Statement of Changes in Partners’ Equity

Movements or changes in the capitalization/equity of the partners are

shown in this statement. The differences between the Statement of
Changes in Owners Equity against Statement of Changes in Partner’s
Equity are as follows:

a. Title – instead of owner’s, partners’ is used to denote that this is

a partnership

b. There are two or more owners in a partnership thus, the changes

in the capital account of each partner is presented

c. The net income is divided between partners (not always equal. It

could be based on the agreement among partners. Example:
50:50 or 40:60, etc.)

c. Statement of Changes in Shareholders Equity

is used in a corporation to show the flow of changes in its equity.

The differences between the two are as follows:

1. Title – instead of owner’s, shareholders’ is used to denote that

this is a corporation

2. There are an unlimited number of shareholders but unlike the

partnership, the names of the shareholders are not indicated
here. Instead, the corporation keeps an official list with the
corporate secretary

3. The capital account is called share capital (just like owner’s

being shareholders)

4. Instead of additional investment, share issuances (happens when

shares are sold to shareholders) increases the share capital of a
corporation

5. Instead of withdrawals, distribution of net income to

shareholders decreases the Capital of the corporation.

17
 What’s More

QUICK CHECK

Identify which element of Statement of Changes in Equity is described. Choose the

letter corresponding to the right answer.

a.Drawings b.dividend c.income d. loss e. Additional investment f. debt

______________________ 1. Distribution of income in a corporation
______________________ 2. Result of business operations could either be a ___ or
___.
______________________ 3.
______________________ 4. It increases the equity as a new investment
______________________ 5. Personal use of the assets of the business by the owner

Identify the effects of these transactions to the Equity

a. Increases the equity b. decreases the equity c. no effect to equity d.

not part of equity e. Liability
______________________ 6. Loss
______________________ 7. Profit
______________________ 8. Dividends are distributed to shareholders
______________________9. Land and building was invested in the first quarter by the
owner.
______________________10. New equipment worth P5,000,000 was bought for the
business through a bank loan.

Answers 1.a 2. c, or, 3.d 4. e. 5.a 6. b 7. a 8. b 9.a. 10. c

Sample problem

Owner, Neil Dipagan invested an initial capital amounting to P50,000 in order

to put up his Musical Instruments company. During the first year of
operations (2016), the company had a loss of P25,000. Because of this, Neil
invested additional capital amounting to P50,000 in 2017. In the second year
(2017), the company had a net income of P100,000 and Neil withdrew
P10,000 for personal use. Compute for the ending capital balance of Neil for
the year 2017. Answer: P165,000 (Topic: Ending Balance in the Statement of
Changes in Instruction: Prepare a Statement of Changes in Equity for Neil
Dipagan in December 31, 2017.

18
 Okay so it looks like this (Solution)

Step 1. Make the MUSICAL INSTRUMENTS COMPANY

Heading Statement of Changes in Owner’s Equity
For the year ended December 31, 2016
Step 2. Find the
Beginning
Step Capital
1. Make Balance
A Neil Dipagan Capital as of January 1, 2017 Php 25,000.00
Heading
Step 3. Find the Additional Add: Additional Investment in 2017 Php 50,000.00
Investments & Net Income
Net Income for the year 2017 100,000.00 150,000.00

Step 4. Add All 2&3 Total 175,000.00

Step 5 Minus /deduct Less: Neil Dipagan Withdrawals 10,000.00

owners drawings

Step 6 Ending Capital Mr. Davao Capital as of December 31, 2016 Php 165,000.00
balance

*Where did Neil Dipagan January 1capital come from?

( Solution: Beginning Capital Balance 2016 Php 50,000.00-loss 2016 25,000=P25,000.00)

What I Have Learned

Now what does the Statement of Changes in Equity Show?

⚫ The statement of changes in equity of a single proprietor presents the user with
information on how much is the beginning capital of the owner at the start of
operations in the fiscal year. It also shows much new investments were added, and
how much income was earned and added as well. It also presents the reductions
from capital due to withdrawals of owners and when business operations sustain
losses.

⚫ A statement of changes in equity reflects all changes in the capitalization of the

owners of the business between the beginning and the end of the reporting period.

⚫ The changes or movement resulted from transactions with owners in their capacity
as owners (ie owner changes in equity) reflecting the increase or decrease in net
assets in the period.

⚫ This statement provides a linkage between the statement of financial position and
statement of comprehensive income of the business.

19
 What I Can Do

Dude, you are now ready to apply your new found knowledge to good use.
In each of the instances choose which type of business organization suits
the investment goals of the owner. Let’s do this!

Instruction: Write the answer in the space provided for

A. Name the ideal form of business organization suited to the

investment goals of the owner. Write your choice in the blank provided
for. Example b. Partnerhip
a. Single Proprietorship, b.Partnership, c.Corporation

______________________ 1. Small businesses that are easy to start and require

small capital, although unfortunately produce
limited profit.

______________________ 2. The type of business that provide expertise to clients

like auditing firms, law firms.

______________________ 3. Businesses in growing industry but requires large

capitalization.

______________________ 4. Business you want to invest in but you have no time

to get involved in its day to day operations. And
most importantly, you don’t want to risk your
personal assets.

______________________5. Business that you want absolute control, and no

meddling from others.

B. True or False (Write true if sentence is correct, otherwise, write

false).

______________________ 6. All SCEs for all forms of businesses are alike

because they all show equity.

______________________ 7. The amount of withdrawal made by a single

proprietor is limited only to his investment.

______________________ 8. Giving away dividends to shareholders decrease the

capital of a corporation if it is in the form of assets.

______________________ 9. Personal use of cash of the business by the owners

is already withdrawal of capital.

______________________ 10. In a partnership a partner can contribute his

expertise and industry to the common fund.

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C. Identify the effects of these transactions to the Equity

a.Increases the equity b. decreases the equity c. no effect to equity

11. ___________________ Income of the business.

12.___________________ Use of cash by the owner to buy equipment for the business
13.___________________ The owner receives dividend from his personal assets
14.____________________Land and building was initial investment by the owner.

15.____________________New equipment worth P5,000,000 was bought for the

business through a bank loan.

D. Problem Solving:

Owner, Desiree Socorro is content, her capital has already reached Php
50,000,000 at the beginning of January 2020 in a store named Fitmat. To
welcome the new year the store treated their staff to cash bonuses and a big party.
In February 14, 2020 the owner added P25,000,000.00 personal investment to
Fitmat to fund the expansion of the business.

However, towards the end of March Covid 19 struck. The country was put
into quarantine. Business closed. To date, her losses is running at
P9,000,000.00. Short of cash, she withdrew P1,000,000 for personal use. Her
family want to know how is Fitmat?

She asks your help in preparing a Statement of Changes in Equity.

Answer: P165,000 (Tc: Ending Balance in the Statement of Changes

Instruction: Prepare a Statement of Changes in Equity for Fitmat
in 2017.

21
 Assessment

Well, you have already accomplished a much. Its time you try to test your
knowledge and skills on the topics we have discussed.

Instruction: Choose the letter of your choice and write it on the blank.

1. ___________Which form of business organization puts the least risk on its owners?
a. single proprietorship b. corporation c.partnership d. assets
2. ___________Which form of business organization is owned by only one person?
a. single proprietorship b. corporation c.partnership d. institution
3.___________Which business is formed by two or more persons contributing
money, or property, or industry?
a. single proprieorship b. corporation c.partnership d.cooperative
4.___________Which financial statementt focus on equity?
b. Statement of Fin. Condition b. Statement of Comp. Income
c. Statement of Changes in Equity d. Cash Flow
5. ___________ Which element in the Statement of Changes in Equity (SCE) increases
in owner’s equity without the need for additional investment?
b. Drawings b. Income c. Beginning Capital d. losses
6. ___________ What decreases owner’s equity due to poor business operation?
a.Drawings b. Income c. Beginning Capital d. losses
7. ___________ Which SCE is used by a corporation?
a. Statement of Changes in Equity (SCE) Single Proprietorship
b. SCE in Partnership c. SCE in Corporation d. Cash flow
8. ___________ What decreases owner’s equity apart from net effect of revenues and
expenses? a. Drawings b. Income c. Beginning Capital d. losses
9. ___________ What type of SCE is prepared for for a single proprietorship?
a. Statement of Changes in Equity Single Proprietorship b. SCE in
Partnership c. SCE in Corporation d. Cash flow
10. ___________ Which advantage in the single proprietorship allows it to be the choice
of many businesses except. a. Easy to put up b. freedom of
management c. small capital d. large capitalization
11. ___________ Which disadvantage in the partnership makes it risky for
investment? a. income b. camaraderie c. unlimited liability
d. large investment
12. ___________ What advantage of a corporation addresses risk of investment?
a. Liability is up to investment only b. limited cash inflows c. large
capital d. portability of capital
13. ___________ What is the advantage of a corporation that makes it the choice of
many businesses except?
b. Limited risk b. legal personality c. easy to raise capital d. limited
life
14. ___________ What is the difference between SCE of partnership and single
proprietorship in terms of net income?
a. big investment b. income c. division of income d. drawing method
15. ___________ How does a corporation distribute its income?
a. Cash flow b. dividend c. Retained earnings d. shares

22
I. Problem Solving (25 pts)
The following data were retrieved from the records of Borla’s Barbecue Stand for the
year ended December 31, 2016:
Borla Capital, January 1, 2016 Php 120,000
Borla Capital, December 31, 2016 5,000
Withdrawals of Capital 210,000
Additional Investments 50,000
Net Income for the Year Ended Dec. 31, 2016 ?
Instructions:
a. Prepare the Statement of Changes in Equity in good form
(10 pts)
b. Answer the following Questions:
1. What is the effect of the withdrawals of the owner to the assets of the
business? (5 pts)
2. What will it do to the operations of the business? (5)
3. Create a better alternative for Borla other than withdrawals (5pts)

Growth doesnt come with a single action. It is the

consequence of persistence, courage and hard work.

23
 Additional Activities
If you have reached this far, it only means one thing, you are already confident of
your understanding and are willing to hone your skills further. These are practice
problems that will further enhance your knowledge and skills.

Practice Problems you can do to hone your skills.

Short Problems
1. Caňas beginning owner’s equity amounted to P 50,000. Net profit for the
year totaled P 4,000. No additional investments and withdrawals for the
period was made. Compute: Did the equity for this period increase? How
Much? ___________________________________
Answer: Increase is Ph. 4,000
2. Suraje’s Ending owner’s equity amounted to Ph. 120,000. Additional
investments during the year amounted to Ph. 54,000. Withdrawals totaled
Ph. 30,000. Compute for the company’s net income for the year assuming
beginning equity is Ph. 25,000.
How Much? ___________________________________

Practice Problems on Statement of Changes in Equity

1. Betol Trading Company has Ph. 50,000 of capital at the beginning of a

reporting period. The entity earns Ph. 7,860 of income, and the owner
withdraws Ph. 1,500 from the capital account for the year ended December
31, 2018.

Prepare the Statement of Changes in Equity.

2. Dominicata Company has Ph. 50,000 of capital at the beginning of a

reporting period. The entity earns Ph. 7,860 of income, and the owner
withdraws Ph. 1,500 from the capital account for the year ended December
31, 2018.
Prepare the Statement of Changes in Equity.

24
 25
BETOL TRADING COMPANY
Statement Of Changes Equity
For the Year Ended December 31, 2018
Betol Capital, January 1, 2018 Php 50,000
Add:
Net Profit 2018 7,800
Sub- total Php 57,800
Less:
Withdrawals for the year 1,500
Betol Capital, December 31, 2018 Php 56,300
_________________________________________________________________________
Solution for Problem 2
DOMINICATA CONVENIENCE STORE
Statement of Changes in Owner’s Equity
For the Year Ended December 31, 2018
Dominicata Capital, January 1, 2018 Php 50,000
Add: Additional contributions during the period 9,000
Net Profit 2018 24,500
Sub- total Php 83,500
Less:
Withdrawals for the year 12,000
Dominicata Capital, December 31, 2018 Php 71,500
If you got the correct solution you have done well in this module, Congratulations! With
continued hard work you will again do well in the next module, the Statement of Cash Flows.
Best of Luck!
Short Problems Solutions
1.Answer: Increase is Ph. 4,000
2.Answer: P 71,000 (120,000 + 30,000 – 54,000 – 25,000)
Answer Key
 26
What’s In
What I Know/ What I can do
Quick Check (p21)
Assessment
(p 7)
(pp 6 /23
What I can do
Answers Identification
1. Statement of Financial Position
1. B
2. Statement of Financial Position
1. Single Proprietorship
2. A
3. Statement of Comp. Income
3. C
4. Statement of Comp. Income 2. Partnership
4. c
5. Statement of Comp. Income
5. B 3. Corporation
6. Cost of Goods Sold
6. D
7. Cost of goods sold 4. Corporation
7. C 8. Selling Expenses
8. A 9. Selling Expenses 5. Single Proprietorship
9. A 10. Other Expenses
10. D True or False
11. C
6. False
12. A
13. D 7. False
14. C
15. B 8. True
9. True
10. True
Effects of Transactions
11. B
12. C
13. C
14. B
15. c
 References

Commission on Higher Education. (2016) Teaching guide for senior high school:
Fundamentals of accountancy, business and management 2.

Price, J. E., Haddock, M. D., & Brock, H. R. (1999). College Accounting (Chapters 1-
29). McGraw-Hill Higher Education.

Spadaccini, M (2009). The basics of business structure. Entrepreneur

Magazine Retrieved on May 23, 2020 from
https://www.entrepreneur.com/article/200516

27
 DISCLAIMER
This Self-learning Module (SLM) was developed by DepEd – Division of General
Santos City with the primary objective of preparing for and addressing the new
normal. Contents of this module were based on DepEd’s Most Essential Learning
Competencies (MELC). This is a supplementary material to be used by all learners
in General Santos City in all public schools beginning SY 2020-2021. The process
of LR development was observed in the production of this module. This is version
1.0. We highly encourage feedback, comments, and recommendations.

For inquiries or feedback, please write or call:

Department of Education – Division of General Santos City

Learning Resource Management System (LRMS)

Tiongson St., Lagao, General Santos City

Telefax No.: (083) 552-8909

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