AOF Principles of Accounting

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Presentation transcript:

AOF Principles of Accounting Unit 2, Lesson 7 Statement of Changes in Owner’s Equity Copyright © 2008–2012 National Academy Foundation. All rights reserved.

The statement of changes in owner’s equity (SCOE) is the second financial statement prepared when closing the books The SCOE is usually prepared after the income statement and before the balance sheet The SCOE reports the change in capital from the beginning to the end of a time period Capital can be increased or decreased during each accounting cycle What are the benefits of reinvesting a company’s retained earnings back into the company?

The SCOE is simply an equation shown in statement form Beginning Capital Balance + Net Income and/or Investments by Owner  Withdrawals and/or Net Loss Ending Capital Balance

The statement of changes in owner’s equity is one of the statements that shows the condition of the company 1. Income Statement Inflow and outflow amounts: money earned; expenses incurred 2. The Financial Condition of the Company Statement of Changes in Owner’s Equity How much capital increased or decreased and where the capital came from or left the company 3. Balance Sheet What the business owns, owes, and is worth