Statement of Changes in

Equity
Statement of Changes in Equity in Sole Proprietorship
The elements of SCE for a sole proprietorship include the beginning capital, additional
income, net income and withdrawals. The heading of the SCE resembles that of a
statement of comprehensive income. This is because the SCE shows the movement in the
capital account of the owner.

The equity beginning is the opening balance of owner’s equity account in the previous
year. Additional investment pertains to any capital infusion made by the owner for the
year. Net income pertains to the amount earned by the sole proprietorship for the year
which amount is taken from the SCI. After net income, drawing is deducted from balance.
Drawing represents the owner’s return investment.
STEPS IN PREPARING THE STATEMENT OF CHANGES IN EQUITY

1. Draft the heading

2. Determine the beginning balance of capital

3. Determine the amount of investment (initial or additonal)

4. Determine the amount of net income

5. Determine the balance of the drawing (withdrawal) account

6. Determine the ending balance of the capital or owner’s equity account

Owner’s Equity sometimes called capital or proprietorship, is the excess of
assets over liabilities of a business.
● Capital – this is the amount invested in the business by the owner as of the
Statement of Financial Position date.
● Withdrawal – when the owner withdraws cash or other assets from the
business for personal use, its assets and its owner’s equity both decrease.
The amounts taken out of the business appear in a separate account entitled
“Withdrawals” or “Drawing”. If withdrawals were recorded directly in the
capital account, the amount of owner withdrawals would be merged with
owner investments. To separate these two amounts for decision making,
businesses used a separate account for withdrawals. This account shows a
decrease in owner’s equity.
 TYPES OF WITHDRAWALS

Temporary Permanent

 Owners withdraws assets from  Owner’s withdraws assets from the

the business in anticipation of business and has no intention of
future profits returning the amount.
 Recorded by using the  Recorded by using the “Owner’s
“Owner’s Drawing” account Capital” account
Example of an SCE

ABC Company
Statement of Changes in Equity
For the year ended December 31, 2019

ABC equity, beginning 100,000

Add:
Additional investment 10,000
Net Income 25,000 35,000
135,000

Less: ABC Drawing (20,000)

ABC Equity, ending 115,000
Statement of Changes in Partner’s Equity (Capital)

A Statement of changes in partner’s equity (capital) is prepared

for partnerships after preparing the statement of comprehensive
income. The said statement will have identical line items with the
SCE of sole proprietorships. These line items include, beginning
equity, net income, additional investments, withdrawals and the
ending capital. However, the major difference of a partnership’s
SCE to a sole proprietorship’s SCE is the heading reserved for each
partner’s interests.
Note A - Schedule of Net Income Distributions
For the Period Ended December 31, 2014

Amonia Amoranto Berylium Bersola Cadoium Code Total

Salaries 12,000 240,000 240,000 492,000

Interest 120,000 60,000 36,000 216,000
Bonus 32,000 156,000 188,000
Remainder 68,000 400,000 68,000 204,000

Share in Net Income 200,000 400,000 500,000 1,100,000

Example of SCE in Partnership
ABC PARTNERSHIP
Statement of Changes in Partner’s Capital Equity
For the period ended December 31, 2019

Amonia Amoranto Berylium Bersola Cadium Code Total

Partner’s Eqauity, Jan. 2019 1,000,000 500,000 300,000 1,800,000

Add:
Share in Net Income (Note A) 200,000 400,000 500,000 1,100,000
Additional investments 500,000 500,000
Less: Withdrawals - (200,000) ( 50,000) ( 250,000)
PARTNER’S EQUITY,
December 31, 2019 1,700,000 700,000 750,000 3,150,000
Statement of Changes in Equity in Corporation

1. COMMON STOCK - THIS COLUMN SHOWS THE SHARES ISSUED BY THE COMPANY. IT
CONTAINS THE NUMBER OF SHARES ISSUED BY THE COMPANY MULTIPLIED BY PAR
VALUE.
2. ADDITONAL PAID-IN CAPITAL - IT SHOWS THE AMOUNT OF MONEY RECIEVED BY THE
COMPANY FROM THE ISSUANCE OF SHARES, IN EXCESS OF THE PAR.
3. RETAINED EARNINGS - CONTAINS ALL NET INCOME AND NET LOSS INCURRED BY THE
CORPORATION FOR THE CURRENT AND PREVIOUS YEARS. IF THE CORPORATION
DECIDES TO PAY DIVIDENDS TO STOCKHOLDERS, THE DIVIDENDS ARE TAKEN FROM
THIS ACCOUNT.
If for example, during the current year Basil Corporation issues 10,000 shares
(P10 par) for 11 pesos, the par value of 100,000 will go the common stock
column, while the excess of 10,000 (issue price of 11 less 10, multiplied by
10,000 shares) will go to the additional paid-in capital column.
Corporate Statement in Changes in Equity
BASIL CORPORATION
Statement of Changes of Stockholder’s Equity
For the period ended December 31, 2019

Common Stock Additional RetainedTotal

Paid-in CapitaL Earnings

Balance, January 1, 2019 1,000,000 100,000 200,000 1,300,000

Add: Additional Stock Issuance 100,000 10,000 110,000
Net Income for 2019 - 150,000 150,000
Total 1,100,000 110,000 350,000 1,560,000
Less:
Dividends for 2018 - - (100,000) (100,000)

Balance, December 31, 2019 1,100,000 110,000 250,000 1,460,000