FABM_SCE_Lesson.pptx statement in change

Fabm 2

1. Learning competencies: 1. Define Statement of Changes in Equity; 2. Identify the components of SCE; 3. Forms of Business organizations

2. Statement of Changes in Equity

3. If you were to reduce a corporation’s entire balance sheet into its most skel etal form, you would end up with the following accounting equation: Asset = Liabilities + Owner ’s Equity As you can see, stockholders’ equity is one of the three main components of a n entity ’s balance sheet. If you rearrange the equation, you will see that stockholders’ equity is the difference between the asset amounts and the liability amounts: Asset - Liabilities = Owner’s Equity

4. What is equity and Changes in Equity? Equity - Equity /capital- it is the remaining value of an owner’s interest in the assets of the business after considering all liabilities. It is equal to total assets minus total liabilities. This account is used to record the original and additional investment of the owner in the business entity. Statement of Changes in Equity The Statement of Changes in Equity or Statement of Owner’s Equity (SCE) recorded and summarizes the movement that is occurred in owner’s equity. It reflects the increase and decrease in the owner’s net assets during the accounting period. The capital account/owner’s equity changes due to contributions, withdrawals, and net income or net loss

5. Increased of owner’s equity are: Decreased Owner’s Equity are: Additional Investment Drawing/ Withdrawals Profit/Net Income Net Loss This statement is prepared prior to preparation of the Statement of Financial Position to be able to obtain the ending balance of the equity to be used in the SFP. (Haddock, Price, & Farina, 2012).

6. The statement of financial position or balance sheet shows the same components of the assets and liabilities for the three forms of business organization. The accounting equation is applied in the same manner for sole proprietorship, partnership, and corporation.

7. B . Partnership In a partnership, there are more than one owner. Assume the partners are Marko Reynes and Jose Canlas, and the following changes happened within the accounting period :

8. Statement of Changes in Owner’s Equity for a Single/Sole Proprietorship The “Statement of Owner’s Equity or Statement of Changes in Owner’s Equity” summarizes the items affecting the capital account of a sole/single proprietorship business. A sole proprietorship’s capital is affected by four items: owner’s contributions, owner’s withdrawals, income and expense.

9. The following are the steps in preparing a statement of Changes in Owner’s Equity for sole proprietorship using the adjusted trial balance: STEP 1: Gather the needed information. The Statement of Changes in Owner’s Equity is prepared second to the income S tatement. Again, the most appropriate source of information in preparing financial statements would be the adjusted trial balance or any report with a complete list of updated accounts may be used.

10. 1. Beginning owner’s equity amounted to 350,000. Net loss for the year totaled Php . 55,000. No additional investments and withdrawals for the period. Compute for the total increase and decrease in equity for the year. 2. Ending owner’s equity amounted to Php . 80,000. Additional Investments during the year amounted to Php . 40,000. Owner withdraw totaled of Php . 65,000. Compute for total owner’s equity for the year .