 If you were the owner of a

company, which format of income

statement would you prefer to
use? Why?
 OOOOPPPPSSS!

Let’s play

Word SCRAMBLE……
DIRECTION:
Form into three (3) groups.
Each group is given sets of scrambled
letters.
You are going to arrange those letters to
form the correct word.
The first group to guess all the correct
words wins the game.
 ANALYSIS

 Are you familiar with these

words? Name some adjectives to
associate with them.
 What are the common words
that you use to describe them?
 How did you arrive in these
adjectives?
 How are these words
related to the Statement of
Changes in Equity?
 What is a business
organization?
What are the forms of business
organization?
Business organization- are entities
formed to earn profit.

 FORMS of BusinessOrganization
 Sole Proprietorship
 Partnership
 Corporation
 Describe the structure of a
Single Proprietorship.
• Formed by a single individual
• Do not have separate legal
existence from the owner
• Enters into contract under owner’s
name.
 What is Net Income?
What is Net Loss?
Net Income/Profit – represents a
increase in the owner’s interest in
the business
REVENUE – is an asset received
(increasing earned equity)

EXPENSE – is an asset
sacrificed (decreasing earned
equity)
 STATEMENT OF CHANGES IN
OWNER’S EQUITY (Statement of Capital)

 Is a financial statement that shows

how the Income Statement and the
Statement of Financial
Position(Balance Sheet) are related.
Purpose of Statement of Changes in
Equity
 Shows how the owner’s equity
reported on the Statement of
Financial Position, moved from its
balance at the beginning of the period
to its balance at the end of the period.
Purpose of Statement of Changes in
Owner’s Equity

 Bridge statement
 Shows how the Income
Statement and the Balance
Sheet are related.
Purpose of Statement of Changes in
Owner’s Equity

 Bridge statement
 Shows how the Income
Statement and the Balance
Sheet are related.
Statement of Changes in Equity
 Heading
Name of business
Name of the statement
Period

ABM International Company

Statement of Changes in Owner’s Equity
For the year ended, December 31, 2016
Basic format for single proprietorship
ABM International Company
Statement of Changes in Owner’s Equity
For the year ended, December 31, 2016

ABM, Capital, January 1, 2016 ₱ 741,000

Add: Net Income 129,000
ABM, Capital, January 31, 2016 ₱ 870,000
Format for partnership:
• There is a capital balance for each
partner
• Net income would be shared by
the partners according to the
partnership agreement.
 Basic format for a partnership
ABM International Company
Statement of Changes in Owner’s Equity
For the year ended, December 31, 2016

Kasilag Dela Rama Fuentes

Capital balance, 01/01/2016 ₱50,000 ₱ 30,000 ₱ 20,000
Add: Share in Net Income 64,500 38,700 25,800
Capital balance, 12/31/2016 ₱870,000 ₱₱
 ABM International Inc.
Income Statement

For the year ended, December 31, 2016

Sales ₱ 260,000
Less: Cost of Goods Sold 103,500
Gross Profit 156,500
Less: Selling and Administrative Expenses
Salaries Expense 47,500
Utilities Expense 10,000
Total Operating Expenses 57,500 Operating Income
99,000
Add(Deduct)Other Revenues(Expenses)
Rent Revenue 30,000

Net Income ₱ 129,000

 ABM International Company
Account Form: Statement of Financial Position
As of December 31, 2017
(in Philippine Peso)
Assets Liabilities and Owner’s Equity
Current Assets Current Liabilities
Petty Cash Fund ₱ 5,000 Expenses Payable ₱ 2,000
Cash in Bank 146,400 Accounts Payable 65,000
Accounts Receivable(net) 163,000 Withholding Taxes Payable 14,500
Unused Supplies 135,000 SSS/EC Premiums Payable 4,900
Prepaid Insurance 2,000 HDMF Premiums Payable 2,000
Rental Deposit 150,000 Philhealth Premiums Payable 3,500
Total Current Assets 601,400 Total Current Liabilities 91,900
Noncurrent Liabilities:
Loans Payable 100,000
Total Liabilities 191,900
Account Form:
continuation

Noncurrent Assets Owner’s Equity

Office Equipment, (net ₱4,500) 65,500
ABM, Capital 870,000
Laboratory Equipment, (net ₱5000) 395,000
Net Noncurrent Assets 460,500
TOTAL ASSETS ₱1,061,900 TOTAL LIABILITIES & OWNER’S EQUITY ₱ 1,061,900
DRAWINGS
 Sole Proprietorship:
 little chance to restrict the owner from
taking funds out of the company
 Owner may take cash for personal use
 Distributions to the owner are deducted
from capital balance.
DRAWINGS
 Partnership:
 Partnership agreements provide when and
what amounts partners may take or
withdraw
 Withdrawals are deducted from the
partner’s capital balance.
ACTIVITY:
Kasilag’s Company was
organized on January 3, 2010.
The company experienced a
modest net income of ₱ 75,000
in 2010.
a. Prepare a Statement of Changes in
Owner’s Equity for Kasilag Company for
the year ended December 31, 2010,
assuming that Lukresia Kasilag began the
company as a sole proprietorship by
investing ₱ 100,000 of her own money.
b. Prepare a statement of capital for Kasilag
Company for the year ended December 31,
2010, assuming Lukresia Kasilag, Honorata
Dela Rama, and Jovita Fuentes began the
company as a partnership.
b.The three (3) partners have agreed to share
any income or loss in the same proportion as
their initial investment, which are as follows:
Kasilag ₱ 50,000
Dela Rama 30,000
Fuentes 20,000

Total ₱ 100,000
 Criteria for grading
Headings 10%
Format 30%
Monetary value 40%
Total value 20%

TOTAL 100%
ASSESSMENT:
ANSWER THE FOLLOWING.

1. How is income shared in a

partnership?
2. What does a Statement of Changes in Equity
shows?
3.Why is a Statement of Changes in
Equity considered as a Bridge
Statement?
4. How does net profit/net loss serves links the
information between Income Statement and the
Balance Sheet?
ASSESSMENT:
ANSWERS

1. How is income shared in a

partnership? It is sahred according
to its capital agreement.
2. What does a Statement of Changes in Equity
shows?
It shows how the owner’s equity as reported on
the Statement of Financial Position, moved from
its balance at the beginning of the period to its
balance at the end of the period.
3.Why is a Statement of Changes in
Equity considered as a Bridge
Statement? It shows how the Income
statement and the Statement of
Financial Position (Balance Sheet) are
related.
4. How does net profit/net loss links the
information between Income Statement and the
Balance Sheet? Net profit/loss
(addition/deduction) shows the past performance
of a company that is at least partially responsible
for the present condition of an enterprise.
God bless you!!!