The statement of changes in equity is a financial statement that shows the changes in a company's equity over a period of time. Equity is the difference between a company's assets and liabilities. The statement of changes in equity shows how a company's equity has changed as a result of earnings or losses, capital contributions, and distributions.
The statement of changes in equity is divided into three sections:
Income: This section shows the revenues and expenses that have affected a company's equity over the period of time.
Capital: This section shows the changes in a company's share capital over the period of time.
Distributions: This section shows the distributions of capital that have been made to a company's owners over the period of time.
The statement of changes in equity is an important financial statement because it provides information about how a company's equity has changed over a period of time. This information can be useful for investors, creditors, and other users of financial statements to assess a company's financial health.
Here are some examples of how the statement of changes in equity can be used by investors, creditors, and other users of financial statements:
Investors can use the statement of changes in equity to assess a company's performance. By comparing a company's income, capital, and distributions of capital from one period to another, investors can obtain information about how the company is generating earnings and using its resources.
Creditors can use the statement of changes in equity to assess a company's risk. By observing the changes in a company's equity, creditors can obtain information about a company's ability to repay its debts.
Other users of financial statements can use the statement of changes in equity to obtain information about a company's financial health. The statement of changes in equity is a useful tool for assessing a company's ability to generate earnings, use its resources, and repay its debts.