Fundamentals of Accountancy,

Business and Management 2

Quarter 1 – Module 4:
Statement of Changes in Equity
Fundamentals of Accountancy, Business and Management 2
Alternative Delivery Mode
Quarter 1 – Module 4: Fundamentals of Accountancy, Business and Management 2 First
Edition, 2020

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Published by the Department of Education Secretary:

Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Department of Education – Tagbilaran City Division

Dr. Cecilio Putong National High School
Senior High School ABM

Writer: EPIFANIA H. MIGUELES

Teacher II
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Introductory Message

For the facilitator:

Welcome to the (Fundamentals of Accountancy, Business and Management

2 Grade 12 ABM) Alternative Delivery Mode (ADM) Module on the
Statement of Changes in Equity!

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.

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For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 2

Alternative Delivery Mode (ADM) Module on Statement of Changes in Equity!
This module is primarily designed for learners who are taking-up
Accountancy, Business and Management Track of Senior High School. It is
patterned from the most essential learning competencies of the K-to-12
Curriculum. The content of the modules are the forms of business
organization, namely, single proprietorship, partnership, and corporation,
and the structure of a SCE of a single proprietorship that will equip him/her
in the preparation of the said financial report at their own pace within the
specified time allotment to complete a specific section of self-learning
material on a particular content.

Indeed, learning is fun! So, make the most meaningful journey towards
independent learning and self-discovery of knowledge.

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.

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 What I Have Learned This includes questions or blank
sentence/paragraph to be filled in to process what you learned from
the lesson.

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.

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 We hope that through this material, you will experience meaningful
learning and gain deep understanding of the relevant competencies. You
can do it!

What I Need to Know

This module is intended to help you understand the business organization,

namely, single/sole proprietorship, partnership, and corporation, and the
structure of a SCE of a single/sole proprietorship that will equip him/ her in
the preparation of the said financial report. Statement of changes in
owner’s equity summarizes the changes that occurred in Owner’s Equity. It
is arrived at by determining the Beginning Owner’s Equity which is found in
the general ledger plus Additional Investment and Profit which is found in
Income Statement and the Ending Owner’s Equity which reconciled with the
balance of this statement and what is appearing in the Balance Sheet.
Hence, this lesson provides you, our dear learners with the understanding of the
business organization that will equip you in the preparation of the Statement of
Changes in Equity.

The Module is intended to equip you with knowledge to explain .

After going through this module, you are expected to:

1. Discuss the different forms of business organization

2. Know the accounts that comprise the owner’s equity section of the
statement of financial position
3. Prepare a statement of changes in equity for a single proprietorship.

What I Know

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.
1. Which of the following pertains to a business entity concept?
a. Revenues are recorded when the corresponding cash has been
received.
b. Revenues are recorded when it is earned.

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 c. Transactions of the business (as a separate entity) must be
distinguished from the transactions of the owners.
d. Transactions of the business (as a separate entity) must be
merged with the transactions of the owners.

2. Which of the following is a major type of business organization?

a. Corporations
b. Partnership
c. Sole Proprietorship
d. All of the above

3. How many is considered owner(s) of a sole proprietorship?

a. Five and above
b. More than one
c. One
d. Two but not more than five

4. How many is/are considered owner(s) in a partnership?

a. Five and above
b. More than one
c. One
d. Two but not more than five

5. How are owners of a sole proprietorship called?

a. Partners
b. Shareholders/Stockholders
c. Sole proprietors
d. None of the above

6. How are owners in a partnership called?

a. Partners
b. Shareholders/Stockholders
c. Sole proprietorship
d. None of the above

7. How are owners in a corporation called?

a. Partners
b. Shareholders/Stockholders
c. Sole proprietorship
d. None of the above

8. Which of the following sequences arranges the complexity of business

organizations, from simple to complex?

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 a. Corporation, Sole Proprietorship, Partnership
b. Partnership, Sole Proprietorship, Corporation
c. Sole Proprietorship, Corporation, Partnership
d. Sole Proprietorship, Partnership, Corporation

9. Which of the following sequences arranges the complexity of business

organizations, from difficult to the easiest?
a. Partnership, Sole Proprietorship, Corporation
b. Corporation, Sole Proprietorship, Partnership
c. Sole Proprietorship, Corporation, Partnership
d. Sole Proprietorship, Partnership, Corporation

10. Which of the following is the most appropriate business organization

for an entity named “ Segismundo, Gomez, Valencia, & Co., CPA’s?”
a. Sole Proprietorship
b. Partnership
c. Corporation
d. None of the above

11. Which of the following is most related to saying “two heads are better
than one”?
a. Sole Proprietorship
b. Partnership
c. Corporation
c. Profit

12. Which of the following are subjected to strict regulations?

a. Sole Proprietorship
b. Partnership
c. Corporations
d. None of the above

13. Which of the following is an advantage of a partnership as compared to

a sole proprietorship?
a. Unlimited liability
b. More sources of expertise
c. Concentration of management
d. Limited life
14. Which of the following is a disadvantage of a partnership as compared
to sole proprietorship?
a. Unlimited liability
b. More sources of expertise
c. Concentration of management

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 d. Limited life

15. Generally, how long is the life of a corporation?

a. 50 years, subject to renewal
b. 50 years, not subject renewal
c. As long as the life of the oldest shareholder
d. As long as the life of the youngest shareholder

Lesson
What is a Statement of
1 Changes in Equity?

In this module, the learners will hold an understanding about the

forms of business organization, namely, single/sole proprietorship,
partnership, and corporation, and the structure of a SCE of a single/sole
proprietorship that will equip him/ her in the preparation of the said
financial report.

What’s In

Statement of Comprehensive Income-Merchandising

Business

Last topic, we talked about the different elements of the Statement of

Comprehensive Income for a merchandising business. The statement of
comprehensive income is a statement that reports the results of the
business for one period. The Statement of Comprehensive Income described
as a “for the period” report. Let us recall more of your knowledge on our
topic from the previous module.

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Activity 1: “Understanding Statement of Comprehensive Income”

Direction: Answer what is asked. Write your answer on a separate sheet of

paper.

1. Company’s Cost of Goods Sold amounted to P285, 000. Net cost of

purchases totaled P85, 000. Beginning inventory amounted to P250,
000. Sales amounted to P500, 000. Compute for the company’s
Ending Inventory.
___________________

2. Gross profit of Happy Selling amounted to P 175,000. Beginning

Inventory totaled P 250,000. Ending Inventory amounted to P 50,000
while Net Cost of Purchases totaled P85, 000. Compute for Happy’s
Net Sales.
___________________

3. Happy Selling’s Sales amounted to P500, 000. Sales returns and sales
discounts amounted to P 30,000 and P 10,000 respectively. Purchases
of the company totaled P 100,000 while purchase returns and
purchase discounts amounted to P20, 000 and P 10,000 respectively.
How much is the company’s Net Sales? Net Purchases?
____________________
____________________

4. Happy Selling’s beginning inventory amounted to 250,000. Net

purchases amounted to 70,000. Freight In totaled 15,000. Compute
for the company’s cost of goods available for sale.
____________________

5. Happy Selling Company’s salaries to sales agents amounted to P10,

000. Salaries of accountants amounted to P 20,000. No other
expenses were incurred. How much is the company’s general and
administrative expense?
_____________________

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 What’s New

Activity 1.1 Understanding Statement of Changes in Equity

Direction: Write Increase if the account increases owner’s equity and

Decrease if the account decreases owner’s equity.

1. Additional investment 11. Professional Fees

2. Utilities expense 12. Transportation Expense
3. Service Income 13. Interest Income
4. Capital 14. Payment of Liability
5. Drawing 15. Supplies
6. Wages 16. Building
7. Additional investment 17. Bad debts
8. Cost of Goods Sold 18. Furniture and fixtures
9. Notes Payable 19. Prepaid Rent
10. Allowance for Bad Debts 20. Withdrawals

What is It

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 to be able to obtain
the ending balance of the equity to be used in the SFP. (Haddock,
Price, & Farina, 2012).

SINGLE/SOLE PROPRIETORSHIP –An entity whose assets,

liabilities, income and expenses are centered or owned by only one
person (Haddock, Price, & Farina, 2012).

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PARTNERSHIP – An entity whose assets, liabilities, income and
expenses are centered or owned by two or more persons (Haddock,
Price, & Farina, 2012).
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(Haddock, Price, & Farina, 2012).

Initial Investment – The very first investment of the owner to the

company.
Additional Investment – Increases to owner’s equity by adding
investments by the owner(Haddock, Price, & Farina, 2012).
Withdrawals –Decreases to owner’s equity by withdrawing assets by
the owner (Haddock, Price, & Farina, 2012).
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 shareholders based on the shares that they have (percentage of
ownership of the company)

Forms of Business and their owner’s as presented in the equity

account
Forms of Business Owner/s
1. Single Proprietorship Proprietor
2. Partnership Partners
3. Corporation Shareholders
4. Cooperative Members

Parts of the Statement of Changes in Equity

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

FUN COMPANY
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2019

Owner*, Capital, January 1, 2019 P100, 000

Add:
Net income for the year 2019 P50, 000
Additional investment 25,000 75, 000
Sub-total P175, 000
Less: Withdrawals for the year 30, 000
Owner*, Capital, December 31, 2019 P145, 000
=========

What’s More

Activity 1.2 FIX ME!!!

Instruction: Arranged the given jumbled letters to identify the correct
terminology. The definition will help you to derive the correct answer.
Answering this activity will develop your visual and analysis skills. Write
your answer in your answer sheet.

JUMBLED LETTERS DEFINITION

1. IIIIOOOEFMNCNTUBRTSD
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
shareholders based on the
shares that they have
(percentage of ownership of the
company)

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 An entity whose assets,
liabilities, income and expenses
are centered or owned by itself
2. TOOORAIRCNP being a legally separate entity
from its owners. Owners are
called shareholders or
stockholders of the company

Increases to owner’s equity by

3. AAIIDLNODTSETEINVMTN
adding investments by the owner
The very first investment of the
4. NTMVNIETSETINILAI
owner to the company
Decreases to owner’s equity by
5. AIHDARWWSLT
withdrawing assets by the owner
An entity whose assets,
liabilities, income and expenses
6. HAEIPRPSRNT are centered or owned by two or
more persons

An entity whose assets,

7. OOOSPPPLERRTEISRIH
8. AATTTTEEEECSSNHGQNIUFYOINM
liabilities, income and expenses
are centered or owned by only
one person
All changes, whether increases
or decreases to the owner’s
interest on the company during
the period are reported here

Net income for the year

9. YIEEERCOTNSQTIUA
Additional investment

10. EEEEYAIUTTCDRQSO Net loss for the year

Withdrawals by the owner

Activity 1.3 Understanding Statement of Changes in Equity

Direction: Write the correct answer on a separate sheet of paper.
_________ 1. A business organization owned by only one owner
_________ 2. Two or more persons combine their property and industry
_________ 3. Has a legal entity entered by the operation of law

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 _________ 4. Includes company name, the statement of equity and the date
_________ 5. The first investment made by the business
_________ 6. Decreases the equity account because the business withdrew
cash
_________ 7. The owner of a single proprietorship business
__________ 8. The owners of a partnership business
__________ 9. The term for the owner of a corporation
_________ 10. Formed in accordance with a cooperative code of the Philippine

Activity 1.4 Understanding Statement of Changes in Equity

Direction: Write True if the statement is correct and False if the statement
is incorrect. Write your answer on a separate sheet of paper.
____________1. Revenue increases owner’s equity account
____________2. Expenses decrease owner’s equity account
___________3. Liability decreases owner’s equity account
___________ 4. Additional investment decreases owner’s equity account
___________ 5. Losses decrease owner’s equity account
___________6. Beginning capital is capital at the beginning of the period
___________ 7. Net loss is added to drawing account before it is deducted to
the capital beginning and additional investment
____________8. The normal balance of Revenue is credit
____________9. The normal balance of Expenses is debit
___________10. The income amount in the statement of changes in owner’s
equity is the same amount as the income from the SCI for the same period.

Stop and Reflect

Now review your previous Activity number 1.3 and 1.4. Do you think the

given ideas/concepts are clear for you to understand the procedures in

preparing SCE?
Agree or Disagree?

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 What I Have Learned

Exit Ticket

Have you learned so much from this module? What are the three
things that you learned today? What are the two things you found
interesting?

3 Things I learned Today 1. _______________________________________

_______________________________________
2.

3. ________________________________________

2 Things I Found Interesting 1. ____________________________________

2. ____________________________________

1 Question I have 1. ________________________________________

What I Can Do

Now that you’ve already learned and understand the Statement of Equity,
it’s time to work to demonstrate your learning. Are you ready? Sure, you are!

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Activity 1.5 Am I Ready?
Directions: Compute for the statement of Changes in Equity. For you to
answer the unknown correctly, try to recall what increases and decreases
owner’s equity account. Write your answer on a separate sheet of paper.

Capital Additional Drawings Profit Capital

Beginning Investment Ending

1. 49, 000 24,000 6,000 84,000 1

2. 34,000 74,000 2 (19,000) 76,500

3. 79,000 19,000 9,000 3 104,000

4. 249,000 4 74,000 199,000 424,000

5. 5 37,000 19,000 249,000 262,000

Assessment

1. Prepare a statement of changes in equity. Use your family name as the

company name for the heading.

Date Date
Dec 31, 2019 March 31,2020

Initial Investment P268,000 P150,000

Additional Investment P125,000 P150,000

Owner’s Drawing P75,000 P80,000

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 Net Profit/(Net Loss) P200,000 (P130,000)

2. The following balances were retrieved from the records of Juan’s

Janitorial Services for the year ended December 31, 2019. Prepare the
Statement of Changes in Equity

Capital, January 1, 2019 P 500,000

Withdrawals 100,000
Additional Investments 50,000
Net Loss 45,000

Additional Activities

Activity 1.6 Solve for the unknown item by recalling what increases and
decreases owner’s account.

Capital 1 P90, 000 P265, 000 P530, 000 P288, 800

Beginning

Additional P150, 000 2 P120, 000 P180, 000 P100, 000

Investment

Drawings P138, 000 P50, 000 3 P75, 000 P85, 000

Profit P120, 000 (P200, 000) P250, 000 4 P150, 000

Capital P217, 000 (P85, 000) P555, 000 P385, 000 5

Ending

References

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Lopez, Jr., Rafael M, “Fundamentals of Accounting,” Simplified Procedural
Approach 2013-2015 Edition

Teaching Guide in Senior High School Fundamentals of Accountancy

Business and Management 2, donated by the Commission on Higher
Education in Collaboration with the Philippine Normal University to
Department of Education

For inquiries or feedback, please write or call:

Department of Education - Bureau of Learning Resources (DepEd-BLR)

Ground Floor, Bonifacio Bldg., DepEd Complex

Meralco Avenue, Pasig City, Philippines 1600

Telefax: (632) 8634-1072; 8634-1054; 8631-4985

Email Address: blr.lrqad@deped.gov.ph * blr.lrpd@deped.gov.ph

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