Preparation of Changes in

Owner’s Equity
TEAM 6
 Purpose And Importance
Statement of changes in equity helps users of financial statement to
identify the factors that cause a change in the owners' equity over the
accounting periods. Whereas movement in shareholder reserves can be
observed from the balance sheet, statement of changes in equity discloses
significant information about equity reserves that is not presented
separately elsewhere in the financial statements which may be useful in
understanding the nature of change in equity reserves. Examples of such
information include share capital issue and redemption during the period,
the effects of changes in accounting policies and correction of prior
period errors, gains and losses recognized outside income statement,
dividends declared and bonus shares issued during the period.
Components
Opening Balance
This represents the balance of shareholders' equity
reserves at the start of the comparative reporting period
as reflected in the prior period's statement of financial
position. The opening balance is unadjusted in respect of
the correction of prior period errors rectified in the
current period and also the effect of changes in
accounting policy implemented during the year as these
are presented separately in the statement of changes in
equity
Effect on Changes in Accounting Policies
Since changes in accounting policies are applied
retrospectively, an adjustment is required in
stockholders' reserves at the start of the comparative
reporting period to restate the opening equity to the
amount that would be arrived if the new accounting
policy had always been applied.
Effect of Correction of
Proper
Period Error of prior period errors must be
The effect of correction
presented separately in the statement of changes in
equity as an adjustment to opening reserves. The effect
of the corrections may not be netted off against the
opening balance of the equity reserves so that the
amounts presented in current period statement might be
easily reconciled and traced from prior period financial
statements.
 Restated Balance
This represents the equity attributable to stockholders at the start of the
comparative period after the adjustments in respect of changes in
accounting policies and correction of prior period errors as explained
above.
Changes in Share Capital
Issue of further share capital during the
period must be added in the statement of
changes in equity whereas redemption of
shares must be deducted therefrom. The
effects of issue and redemption of shares
must be presented separately for share
capital reserve and share premium
reserve.
TEAM 3
 Dividends
Dividend payments issued or announced
during the period must be deducted from
shareholder equity as they represent
distribution of wealth attributable to
stockholders.
Income/ Loss for the Period
This represents the profit or loss
attributable to shareholders during
the period as reported in the income
statement.
 Changes in Revaluation Reserve
Revaluation gains and losses recognized during the period must
be presented in the statement of changes in equity to the extent
that they are recognized outside the income statement.
Revaluation gains recognized in income statement due to reversal
of previous impairment losses however shall not be presented
separately in the statement of changes in equity as they would
already be incorporated in the profit or loss for the period.
 Other gain And Losses
Any other gains and losses not recognized in the income
statement may be presented in the statement of changes in
equity such as actuarial gains and losses arising from the
application of IAS 19 Employee Benefit.
 Closing Balance
This represents the balance of shareholders' equity
reserves at the end of the reporting period as reflected in
the statement of financial position.
 L. Lapid Cleaning and Pressing Service

Statement of Performance

January 31,2019

Service Income 26,500

Rent 10,000
Wage 15,250
Cleaning Supplies used 350
Dep’n – Cleaning Equipment 2,200
Interest Expense 1,200 29,000

Net loss Php 2,500

 Statement of Change in Equity
Beginning Capital

+ Additional Investments

- Net loss
- Withdrawals

Ending Capital
 L. Lapid Cleaning and Pressing Service

Statement of Change in Equity

January 31,2019

Beginning Balance 0
L. Lapid, Capital P 50,000
Investment 0
Less: net loss (2,500)

P 47,500
Net Capital
0
Less: Lapid, Personal
Php 47,500
Ending Capital