Statement of changes in equity
In one sentenceA statement showing how each item of equity changed during the period, from capital and reserves to retained earnings, and why it changed.
Simply put
This statement links the income statement and the financial position: net profit flows into it, distributions and capital increases appear in it, and the final balance moves to equity in the financial position.
It is usually shown as a table: its columns are the items (capital, reserve, retained earnings, total), and its rows are the movements from the opening balance to the closing balance.
Worked example
A small company started the year with equity of 700,000 SAR, made a net profit of 150,000 SAR, distributed 50,000 SAR, and the partners increased capital by 100,000 SAR in cash.
Equity at the start of the year700,000
+ Net profit150,000
− Distributions(50,000)
+ Capital increase100,000
Equity at year end = 700,000 + 150,000 − 50,000 + 100,000900,000 SAR
Don't confuse it with
Retained earningsRetained earnings are one item inside this statement, and the statement shows all equity items together.