THE STATEMENT OF OWNER EQUITY EXAMINES CHANGES IN OWNER EQUITY IN THREE CATEGORIES: 1)RETAINED EARNINGS AND CONTRIBUTED CAPITAL 2)PERSONAL NET WORTH 3)CHANGE.

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Presentation transcript:

THE STATEMENT OF OWNER EQUITY EXAMINES CHANGES IN OWNER EQUITY IN THREE CATEGORIES: 1)RETAINED EARNINGS AND CONTRIBUTED CAPITAL 2)PERSONAL NET WORTH 3)CHANGE IN VALUATION EQUITY

AN IMPORTANT ASPECT OF UNDERSTANDING THE FINANCIAL PROGRESS OF A BUSINESS IS TO SEPARATE THE CHANGE IN EQUITY FROM RETAINED EARNINGS FROM THE CHANGE IN EQUITY FROM CHANGES IN THE MARKET VALUE OF ASSETS. WITHDRAWALS OF NET INCOME OR RETAINED EARNINGS FOR FAMILY LIVING AND PERSONAL INVESTING ARE CRITICAL ITEMS IN RECONCILING OWNER EQUITY.

CHANGES IN OWNER EQUITY = NET INCOME MINUS WITHDRAWALS PLUS (MINUS) CAPITAL ADDITIONS (DISTRIBUTIONS)

WITHDRAWALS REPRESENT ANY USE OF NET INCOME OR BUSINESS CAPITAL WHICH MAKES THAT INCOME OR CAPITAL NO LONGER AVAILABLE FOR BUSINESS USE. CHANGE IN PERSONAL NET WORTH IS A SIMPLE COMPARISON OF BEGINNING AND ENDING PERSONAL NET WORTH FIGURES. ONLY EFFECTS THE MARKET VALUE MEASURE OF OWNERS EQUITY.

l CHANGE IN VALUATION EQUITY AFFECTS ONLY THE MARKET VALUE OWNER EQUITY. VALUATION EQUITY IS THE DIFFERENCE BETWEEN THE CASH VALUATION NET WORTH AND THE MARKET VALUATION NET WORTH.

STATEMENT OF CASH FLOWS THE STATEMENT OF CASH FLOWS FOCUSES ON CASH FLOWS AND SEGREGATES THEM INTO CASH FLOWS FROM OPERATING, INVESTING, AND FINANCING ACTIVITIES. OPERATING ACTIVITIES GENERALLY INVOLVE PRODUCING AND DELIVERING GOODS AND PROVIDING SERVICES. INVESTING ACTIVITIES FOCUS ON CASH FLOWS FROM THE PURCHASE AND SALE OF CAPITAL ASSETS AND NON-FARM ASSETS. FINANCING ACTIVITIES INCLUDE BORROWING AND REPAYMENT OF LOANS.

THE STATEMENT OF CASH FLOWS LINKS TOGETHER CASH, ACCRUAL INCOME AND BALANCE SHEET INFORMATION.