Statement of Owner Equity Gerry Schwab and Sherrill Nott.

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Presentation transcript:

Statement of Owner Equity Gerry Schwab and Sherrill Nott

Statement of Owner Equity Purpose: To reconcile the owner equity amount stated at the beginning of the time period, with the owner equity amount determined at the end of the time period.

OWNER Equity Term used to describe value of the business after the total claims of creditors are subtracted from the value of the assets. The term “owner equity” refers only to a business and this statement includes no information for an individual person.

Net Worth The term “net worth” is used to describe value of business plus personal valuation after the total claims of creditors are subtracted from the value of assets. The term “net worth” refers to a statement for an individual person or a statement for a business which also contains data for an individual person.

Statement of Owner Equity Components should include: 1. Beginning owner equity 2. Plus net income amount 3. Minus owner withdrawals 4. Plus contributions received by business 5. Minus contributions distributed to others 6. Equals Change in Retained Earnings/Contributed Capital 7. Ending Owner Equity (Cost Value Basis)

Statement of Owner Equity Components should include: 7. Ending Owner Equity (Cost Value Basis) 8. Adjustment for change in (market value - cost value) from beginning to end of time period 9. Equals change in market valuation equity 10. Ending Owner Equity (Market Value Basis)

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Statement of Owner Equity 8. Change in Excess of Market Value over Cost Basis of Marketable Securities and Farm Capital Assets

Statement of Owner Equity -- Summary Can determine CHANGE in Owner Equity from beginning to end of time period Components of change are: 1Retained earnings from profit 2Contributed capital from sources outside the business 3Inflation/Deflation -- Change in Market Values