Statement of Changes in Equity

This type of financial statement is used to bridge the gap between the amount of equity the owners have in the business at the beginning of the accounting period and the amount of their equity at the end of the period. The income statement summarizes the revenues and expenses during the accounting period. The statement of changes in financial position is used to show the condition of accounts at the end of a particular period. The statement of changes in owners' equity does a bit of each.

There are several variations or types of statements that can be used to summarize the changes of the rights of owners (e.g., statement of retained earnings, statement of surplus, statement of changes in net worth, statement of shareholders' equity, etc.). The type your business uses will depend on the nature of your business, and your accountant's preference. However, the purpose of all of these "changes" statements is the same, which is to report:

Here's an example of a Statement of Owners' Equity for a partnership:

Marty & Dave's Entrepreneurial Adventureland and Camp
Statement of Owners' Equity
For the Year Ended Dec. 31, 20__

Dave Marty
Partners' equity $ 7,000 $ 9,000
Add: canoe rental income (net) 20,000 20,000

$27,000 $29,000
Deduct: tents & water flume repair 19,000 18,000
Partners' equity Dec. 31 $ 8,000 $11,000
Notes: Partnership agreement limits withdrawals as follows:
Dave $5,000 per year
Marty $7,000 per year

Statements of owners' equity for a corporation. A corporate owners' (stockholders') equity statement shows the paid-in capital invested in the business in exchange for stock, as of the beginning of the accounting period. It also shows how the income shown on the Income Statement was paid out as dividends, or plowed back into the business as retained earnings.