Statement of Changes in

Equity (SCE)
OBJECTIVES:
 DISCUSS THE DIFFERENT FORMS OF BUSINESS
ORGANIZATION;
 PREPARE A STATEMENT OF CHANGES IN EQUITY OF
A SINGLE PROPRIETORSHIP; AND
 APPRECIATE THE IMPORTANCE OF PREPARING THE
SCE
FORMS OF BUSINESS ORGANIZATION:

CORPORATION
Forms of Business Organization

An entity whose assets,

liabilities, income and
expenses are centered or
owned by only one person.
Forms of Business Organization

An entity whose assets,

liabilities, income and expenses
are centered or owned by two
or more persons.
 Forms of Business Organization
PARTNERSHIP
- owners are called “partners”
- Articles of partnership-
agreement
-goal is to divide the profit
among themselves
Forms of Business Organization
An entity whose assets, liabilities,
income and expenses are centered or
owned by itself being a legally
separate entity from its owners.
Stockholders-owners of a corporation
 Forms of Business Organization
CORPORATION
Artificial being created by operation
of law, having the right word of succession and
the powers, attributes and properties expressly
authorized by law or incident to its existence.-
Corporation Code of the Philippines (1980)
 The Accounting Equation
ASSETS = LIABILITIES + OWNER’S EQUITY

Basically the same Basically the same These sections vary depending on
for for whether the entity is:
1. Sole 1. Sole 1. Sole Proprietorship
Proprietorship Proprietorship 2. Partnership
2. Partnership 2. Partnership 3. Corporation
3. Corporation 3. Corporation
 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 to be able to obtain
the ending balance of the equity to be used in
the SFP.
 STATEMENT OF CHANGES IN
EQUITY
Capital – is an account bearing the name of the
owner representing the original and additional
investment of the owner of the business
increased by the amount of net income earned
during the year
 STATEMENT OF CHANGES IN
EQUITY
Capital –it is decreased by the cash or other
assets withdrawn by the owner as well as the
net loss incurred during the year
 STATEMENT OF CHANGES IN
EQUITY
Drawing – represents the withdrawals made by
the owner of the business either in cash or
other assets
STATEMENT OF CHANGES IN EQUITY
OF A SINGLE PROPRIETORSHIP
 STATEMENT OF CHANGES IN
EQUITY

Equity beginning
is the opening balance of the
owner’s equity account
is the ending balance of the
equity account in the previous year
STATEMENT OF CHANGES IN EQUITY
OF A SINGLE PROPRIETORSHIP
 STATEMENT OF CHANGES IN
EQUITY
Net Income
pertains to the amount earned by the
sole proprietorship for the year
the amount is taken from the SCI
STATEMENT OF CHANGES IN EQUITY
OF A SINGLE PROPRIETORSHIP
 STATEMENT OF CHANGES IN
EQUITY
Additional Investment
Pertains to any capital infusion made by
the owner for the year.
Increases to owner’s equity by adding
investments by the owner
 STATEMENT OF CHANGES IN
EQUITY

Initial Investment
the very first investment of
the owner to the company.
STATEMENT OF CHANGES IN EQUITY
OF A SINGLE PROPRIETORSHIP
 STATEMENT OF CHANGES IN
EQUITY
Withdrawals
Represents the owner’s return of
investment
Decreases to owner’s equity by
withdrawing assets by the owner
STATEMENT OF CHANGES IN EQUITY
OF A SINGLE PROPRIETORSHIP
 STATEMENT OF CHANGES IN
EQUITY
Equity ending
Represents the balance of the owner’s
equity at the end of the year
Decreases to owner’s equity by
withdrawing assets by the owner
STATEMENT OF CHANGES IN
EQUITY
STATEMENT OF CHANGES IN PARTNER’S
EQUITY
STATEMENT OF STOCKHOLDER’S EQUITY