Before going over this module, the learner must answer the PRE-TEST in order for the teacher to

assess Recognition of Prior Learning (RPL) and pin point specific topics that need emphasis during
the discussion.

PRE-TEST

Directions: Draw sign if the account increases owner’s equity, sign if it decreases owner’s equity
account and sign If no effect in a yellow paper.

1. Initial investment 11. Professional Fees

2. Rent expense 12. Transportation Expense
3. Service revenue 13. Rental Revenue
4. Capital 14. Payment of Liability
5. Drawing 15. Supplies
6. Salaries 16. Equipment
7. Additional investment 17. Depreciation Expense
8. Cost of Goods Sold 18. Land
9. Accounts Payable 19. Prepaid Expenses
10. Allowance for Bad Debts 20. Withdrawals

LOOKING BACK TO YOUR LESSON

Directions: Match column A with Column B. Write letters only.

Column A Column B
1. Also called a trading business
A. Purchase Discount
2. It is the stock at the beginning
3. A contra purchase account B. Inventory Beginning
4. Sales less cost of sales C. Merchandising business
5. Beginning inventory plus net cost of purchases D. Freight In
6. Transportation paid by the company to their suppliers E. Sales Discount
7. Sales less contra sales account F. Net Sales
8. Cost of goods available for sale less ending inventory G. Cost of Sales
9. Net purchases plus freight in H. Net Cost of Purchases
10. A contra sales account I. Cost of goods available for sale
J. Gross Profit

Module 4
Preparation of Statement of Changes in Equity in a single proprietorship
Learning Outcome(s):
a. At the end of the lesson, the learner is able to:
b. Prepare Statement of Changes in Equity of a Single Proprietorship

The statement of changes in equity shows the movement of

equity account during the period. Whether it increases or decreases at
the end of the accounting period. In this module you have to recall
what increases and decreases owner’s equity account.

Increases owner’s equity accounts are: Decreases owner’s equity account are:

a. Additional investment a. Drawing

b. Profit b. Loss

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
The objective of this module is to prepare the statement of changes in equity of a single
proprietorship business.

Parts of Statement of Changes in Owner’s Equity

a. Heading
b. Increases to Equity
i. Net income for the year
ii. Additional investment
c. Decreases to Equity
i. Net loss for the year
ii. Withdrawals by the owner

Format of SCE if the business has a net income

STEP MIN TUTORIAL SERVICES

STATEMENT OF CHANGES IN OWNER’S EQUITY
For the year ended December 31, 2019 HEADING

Capital, January 31, 2019 P 100,000

INCREASES
Additional Investment P50,000
EQUITY
Add: Net Income 25,000 75,000
Total P175,000
 Less: Drawing 25,000 DECREASES
EQUITY
Capital, December 31, 2019 P150,000

 Shown above is an example of SCE with a positive result of operation. The net income is
added to additional investment and the effect, it increases equity account.

Format of SCE if the business resulted to a net loss

STEP MIN TUTORIAL SERVICES HEADING

STATEMENT OF CHANGES IN OWNER’S EQUITY

For the year ended December 31, 2019

Capital, January 31, 2019 P 100,000 INCREASES
Additional Investment 50,000 EQUITY
Total P 150,000
Less: Drawing P25,000
Net Loss 25,000 50.000 DECREASES
EQUITY
Capital, December 31, 2019 P100,000

 Shown above is an example of SCE with a negative result of operation. The net loss is
added to drawing account and the effect, it decreases the owner’s equity account.

KEYPOINTS
The statement of changes in equity shows the movements in owner’s equity during
the period.

The following accounts affect owner’s equity :

(a) Additional investment by the owner (increase);

(b) Drawings by the owner (decrease);
(c) Profit (increase); and
(d) Loss (decrease)

References:
E-SITES:
To further explore the concept learned today, you may connect to your internet and visit the links
below if possible:
https://www.accountingcoach.com/onlineaccountingcourse
REFERENCES:
Ferrer, R. and Millan, Z. V. (2017). Fundamentals of Accountancy, Business & Management Part 2.
1st Edition
Valencia, E. G., & Roxas, G. F. (2010). Basic Accounting (3rd ed.). Mandaluyong City, Philippines:
Valencia Educational Supply.
Anastacio, V. (2011). Accounting Essentials 1, Centro Escolar University Publisher
 CHECK YOUR UNDERSTANDING
Directions: Solve for the unknown item by recalling what increases and decreases
owner’s account.

1
Capital
Beginning Php90,000 Php265,000 Php530,000 Php288,800

Additional 2
Investment Php150,000 Php120,000 Php180,000 Php100,000

Drawings Php138,000 Php50,000 3 Php75,000. *Php85,000

4
Profit Php120,000 (Php200,000) Php250,000 Php150,000
Capita+ 5
Ending Php217,000 (Php85,000) Php555,000 Php385,000.

Activity 1.

Directions: Write the Correct answer on the space provided before the number.

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.
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 2.

Directions: Write True if the statement is correct and False if the statement is incorrect.

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.
Activity 3.
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.

Capital Additional Capital

Beginning Investment Drawings Profit Ending
?
50,000.00 25,000.00 7,000.00 85,000.00
1
?
2 35,000.00 75,000.00 (20,000.00) 77,500.00
?
3 80,000.00 20,000.00 10,000.00 105,000.00
?
4 250,000.00 75,000.00 200,000.00 425,000.00
?
5 38,000.00 120,000.00 250,000.00 263,000.00

POST-TEST
Directions: Prepare a statement of changes in equity. Use your family name as the
company name for the heading.
Date Dec 31, 2019 Date March 31,2020
Initial Investment Php268,000.00 Php150,000.00

Additional Investment Php125,000.00 Php150,000.00

Owner’s Drawing Php75,000.00 Php80,000.00
Net Profit/(Net Loss) Php200,000.00 (Php130,000.00)