Statement of Changes in Equity

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Explaining Statement of Changes in Equity

A statement of changes in equity can be explained as a statement that can changes in equity for corporation features be created for partnerships, sole proprietorships, or corporations. The key purpose of this statement is to summarize the activity in take equity accounts for a certain period. Sole proprietorships and partnerships follow a similar format for their statements of changes in equity. On the contrary, the statement of changes in equity for a corporation features a slightly different format.

What does Statement of Changes in Equity show?

A statement of changes in equity generally shows the movements of equity in addition to accumulated earnings and losses so as to enable the readers to depict on the sources (where it came from) and outlets of equity (where did it go).

Components of Statement of Changes in Equity

As per IAS 1, the statement of changes in equity is one of the five components of complete financial statements counting income statement, balance sheet, statement of changes in equity, notes to financial statements, and cash flow statements. According to IAS, the statement must include:

I. profit or loss for the specific period

II. every item of income and expenditure for the period which is specified directly in the equity, and the sum of those items

III. total income and expense for the period specified (evaluated as the sum of (I) & (II)), representing individually the total amounts attributable to equity holders of minority interest besides the parent holder

IV. for every component of equity, the effects of changes occurring in the accounting policies and rectification of errors in accord with IAS

In addition to the aforesaid components, the following amounts might also be included in the statement of changes in equity:

I. capital transactions with owners

II. the balance of accumulated profits at the commencing and end of a specific period, as well as the movements for the period

III. a squaring off between the carrying amount of each class of equity capital, share premium, and each reserve at closing stages of each period, thus disclosing each period.