1. AOF Principles of Accounting
Unit 2, Lesson 7
Statement of Changes in Owner’s Equity
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2. 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?

3. 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

4. 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