Statement of Changes in

Equity
Module 3
FABM II
Objectives
Learning Competencies
The learners should be able to:
1. discuss the different forms of business
organization
2. prepare an SCE for single/sole
proprietorship
Review
Tell something about the following terms:
a. Revenues
b. Expenses
c. Income
d. Assets
e. Liabilities
f. Equity
Answers
a. Revenues – service income, sales
b. Expenses – salaries expense, depreciation
expense
c. Income – revenues less expenses (amount
found at the bottom of the SCI)
d. Assets – inventories, prepaid expenses,
property, plant and equipment
e. Liabilities – accounts payable, unearned
income, long-term debt,
Definition of Terms
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 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).
Definition of Terms
SINGLE/SOLE PROPRIETORSHIP –An entity whose
assets, liabilities, income and expenses are centered
or owned by only one person (Haddock, Price, &
Farina, 2012).
PARTNERSHIP – An entity whose assets, liabilities,
income and expenses are centered or owned by two
or more persons (Haddock, Price, & Farina, 2012).
CORPORATION – An entity whose assets, liabilities,
income and expenses are centered or owned by itself
being a legally separate entity from its owners.
Owners are called shareholders or stockholders of
the company(Haddock, Price, & Farina, 2012).
Definition of Terms
Initial Investment – The very first investment of the owner
to the company.
Additional Investment – Increases to owner’s equity by
adding investments by the owner(Haddock, Price, &
Farina, 2012).
Withdrawals –Decreases to owner’s equity by withdrawing
assets by the owner (Haddock, Price, &
Farina, 2012).
*Distribution of Income – When a company is organized as
a corporation, owners (called shareholders) do not
decrease equity by way of withdrawal. Instead, the
corporation distributes the income to the shareholders
based on the shares that they have (percentage of
ownership of the company)
 LEARNING IS FUN COMPANY
STATEMENT OF CHANGES IN PARTNERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2016

Partner A Partner B Total

Capital, January 1, 2016 P 100,000 P 150,000 P 250,000
Add:
Net Income 2016 25,000 25,000 50,000
Additional Investment 50,000 20,000 70,000

Sub-total P 175,000 P 195,000 P 370,000

Less: Withdrawals 100,000 100,000 200,000

Capital, December 31, 2016 P 75,000 P 95,000 P170,000

 LEARNING IS FUN COMPANY
STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2016

Capital, January 1, 2016 P 1,000,000.00

Share Issuance 500,000
Net Income 2016 150,000
Distribution of Income (100,000)
Capital, December 31, 2016 P 1,550,000
EX
Owner, Juan invested an initial capital amounting
P50,000 in order to put up his janitorial services
company. During the first year of operations
(2016), the company had a loss of P25,000.
Because of this, Juan invested additional capital
amounting to P50,000 in 2017. In the second
year (2017), the company had a net income of
P100,000 and Juan withdrew P10,000 for
personal use. Compute for the ending capital
balance of Juan for the year 2017.