DJYSMNHS

FUNDAMENTALS
OF
ACCOUNTANCY, BUSINESS
& MANAGMENT 2
week 5-6
MARY ROSE T. ARAGON
Subject Teacher
djysmnhs
Define Statement of Changes in

OBJECTIVES Equity;

Identify the components of SCE;

Recognize the steps in preparing

SCE.
 Review:
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revenue
expenses
income
assets
liabilities Define each term;
Give specific account titles
for each of the terms.
equity
 Review:
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- a total amount of money that the company was able

revenue to generate from providing services to customers

e x p e n s e s - the cost of operations that a company incurs to

generate revenue

income - the revenue a business earns from selling its goods

and services
assets - the resources owned and controlled by the firm

l i a b i l i t i e s - obligations of a firm which will be settled in the future

 Review:
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r e v e n u e – service income, sales

– salaries expense, depreciation
expenses
expense
income - revenues less expenses
- inventories, prepaid expenses,
assets property, plant and equipment
liabilities - accounts payable, unearned income,
long-term debt,
 Think and Write about all the assets that you have (anything that you own)
DJYSMNHS and how much they cost. Then think about whom you owe money (Liabilities-
friends, family members, parents, etc.) to and how much you owe. Complete

ACTIVITY the table below. Make sure to total the second column (cost) and the fourth
column (amount owed), then deduct the total liabilities from your assets. The
net amount you computed is designated as your Equity.
DJYSMNHS

ACTIVITY
DJYSMNHS

STATEMENT OF
CHANGES IN EQUITY
week 5-6

MARY ROSE T. ARAGON

Subject Teacher
 Meaning
- shows changes, whether increases
SCE
or decreases to the owner’s interest
on the company during the period
are reported here.

- This statement is prepared prior to

preparation of the Statement of
Financial Position to be able to obtain
the ending balance of the equity to
be used in the SFP.
(Haddock, Price, & Farina, 2012).
FORMS OF BUSINESS ORGANIZATION
An entity whose An entity whose assets, An entity whose assets,
assets, liabilities, liabilities, income and liabilities, income and
income and expenses expenses are centered expenses are centered
are centered or or owned by two or or owned by itself being
owned by only one more persons. a legally separate
person. entity from its owners.
SINGLE/SOLE PARTNERSHIP cORPORATION
PROPRIETORSHIP
 SCE IN DIFFERENT FORMS OF
BUSINESS ORGANIZATION
An entity whose An entity whose assets, An entity whose assets,
assets, liabilities, liabilities, income and liabilities, income and
income and expenses expenses are centered expenses are centered
are centered or or owned by two or or owned by itself being
owned by only one more persons. a legally separate
person. entity from its owners.
SINGLE/SOLE PARTNERSHIP cORPORATION
PROPRIETORSHIP
 Other Terms
Initial Investment – The very first
SCE
investment of the owner to the
company.

Additional Investment – Increases to

owner’s equity by adding investments
by the owner

Withdrawals –Decreases to owner’s

equity by withdrawing assets by the
owner
DJYSMNHS

PARTS OF STATEMENT OF
CHANGES IN EQUITY

week 5-6
MARY ROSE T. ARAGON
Subject Teacher
DJYSMNHS
PARTS OF STATEMENT OF CHANGES IN EQUITY
Parts:

*Distribution of Income – When a company is organized as a corporation, owners (called shareholders)

do not decrease equity by way of withdrawal. Instead, the corporation distributes the income to the
hareholders based on the shares that they have (percentage of ownership of the company)
statement of Owners Equity

single / sole
proprietorships
DJYSMNHS SCE FOR SINGLE / SOLE
PROPRIETORSHIPS

a "Statement of Changes in Owner's Equity" summarizes the

items affecting the capital account of a sole /single
proprietorship business.

a sole proprietorship's capital is affected by four item:

owner's contributions, owner's withdrawals, income and
expenses.

There are steps in preparing Statement of Changes in Owners Equity:

DJYSMNHS

STEP 1: GATHER THE NEEDED INFORMATION

DJYSMNHS
DJYSMNHS

STEP 2: PREPARE THE HEADING

DJYSMNHS

STEP 3: REPORT CAPITAL AT THE BEGINNING OF

THE PERIOD
Report the capital balance at the beginning of the
period reported - or the amount at the end of the
previous period.
DJYSMNHS

STEP 4: ADD ADDITIONAL CONTRIBUTIONS

Contributions from owner increases capital,
therefore, it must be added to the capital balance.
DJYSMNHS

STEP 5: ADD NET INCOME

Net Income increases capital, therefore it is added
to the beginning capital balance. Net Income is
equal to all revenues minus all expenses.
DJYSMNHS

STEP 6: DEDUCT OWNER'S WITHRAWALS

Withdrawal made by the owner is recorded separately from
contributions. It can easily found in the adjusted trial balance as
"Owner, Drawings", "Owner withdrawals" or any other appropriate
account. Withdrawal decreases capital, therefore it must be
deducted to the capital balance.
DJYSMNHS

STEP 7: COMPUTE FOR THE ENDING CAPITAL

BALANCE
 Compute for the balance of the capital
account at the end of the period and draw
the lines.

Note: one horizontal line means that a mathematical

operation has been performed. Two horizontal lines
(double-rule) are drawn below the final amount.
EXAMPLE OF SCE
statement of Owners Equity

partnership
and
corporation
partnership
corporation
DJYSMNHS

PRACTICE
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Practice:
Directions: Answer the Easy, Average and Difficult questions:
Easy

1. Which form of business organization puts

the least risk on its owners?

2. Which form of business organization is

owned by only one person?
Practice:
Directions: Answer the Easy, Average and Difficult questions:
medium

1. Increases in owner’s equity without

additional investment

2. Decreases to owner’s equity apart from net

effect of revenues and expenses.
Practice:
Directions: Answer the Easy, Average and Difficult questions:
difficult

1. Beginning owner’s equity amounted to Php

300,000. Net loss for the year totaled Php
45,000. No additional investments and
withdrawals for the period.
Compute for total increase in equity for the year.
Practice:
Directions: Answer the Easy, Average and Difficult questions:
difficult
2. Ending owner’s equity amounted to P70,000.
Additional investments during the year amounted
to P30,000. Withdrawals totaled P50,000.
Compute for the company’s net income for the
year assuming beginning equity is P10,000.
DJYSMNHS

Practice:

ANSWER
fabm 2
Practice:
Directions: Answer the Easy, Average and Difficult questions:
Easy

1. Which form of business organization puts

the least risk on its owners?
corporation

2. Which form of business organization is

owned by only one person?
single/sole proprietorship
Practice:
Directions: Answer the Easy, Average and Difficult questions:
medium

1. Increases in owner’s equity without

additional investment
et income

2. Decreases to owner’s equity apart from net

effect of revenues and expenses.
Withdrawal or Distribution of Income
Practice:
Directions: Answer the Easy, Average and Difficult questions:
difficult

1. Beginning owner’s equity amounted to Php

300,000. Net loss for the year totaled Php
45,000. No additional investments and
withdrawals for the period.
Compute for total increase in equity for the year.
Increase is zero but decrease is P 45,000.
Practice:
Directions: Answer the Easy, Average and Difficult questions:
difficult
2. Ending owner’s equity amounted to P70,000.
Additional investments during the year amounted
to P30,000. Withdrawals totaled P50,000.
Compute for the company’s net income for the
year assuming beginning equity is P10,000.

P80,000
DJYSMNHS

STATEMENT OF
CHANGES IN EQUITY
COMPUTE AND PREPARE

week 5-6
djysmnhs
Prepare a statement of

OBJECTIVES Changes in Equity for a single

proprietorship.

Show appreciation on the

importance of SCE in an

organization.
DJYSMNHS

QUIZ
COMPUTE AND PREPARE

week 5-6
QUIZ Directions: Answer the following questions:

1. Decreases in equity aside from

withdrawals of the owners.
2. A type of business that is owned by
at least 2 persons.
3. In the Statement of Changes in
Equity, the company had decreases
in capital wherein income is
distributed to owners. Identify the
kind of business.
3. Owner, Juan invested an initial capital amounting
P50,000 in order to put up his janitorial services
company. During the first year of operations (2016),
the company had a loss of P25,000. Because of this,
Juan invested additional capital amounting to
P50,000 in 2017. In the second year (2017), the
company had a net income of P100,000 and Juan
withdrew P10,000 for personal use. Compute for the
ending capital balance of Juan for the year 2017.
4. Owner Juana invested P100,000 to start her
laundry business. During the first year of
operations (2016), the company had a net income
of P15,000. Juana invested additional P100,000 to
grow the business. In 2017, the business earned
P50,000. As of December 31, 2017, Juana’s capital
balance is P200,000. How much is Juana’s
withdrawal?
5. The following balances were retrieved from the
records of Juan’s Janitorial Services for the year
ended December 31, 2016:

Capital, January 1, 2016 P 500,000

Withdrawals 100,000
Additional Investments 50,000
Net Loss 45,000

Prepare the Statement of Changes in Equity.

DJYSMNHS

ANSWER
fabm 2
Quiz on the preparation of SCE
QUIZ Directions: Answer the following questions:

1. Decreases in equity aside from

withdrawals of the owners. Net loss
2. A type of business that is owned by
at least 2 persons. partnership
3. In the Statement of Changes in
Equity, the company had decreases
in capital wherein income is
distributed to owners. Identify the
kind of business. Corporation
4. Owner, Juan invested an initial capital amounting
P50,000 in order to put up his janitorial services
company. During the first year of operations (2016),
the company had a loss of P25,000. Because of this,
Juan invested additional capital amounting to
P50,000 in 2017. In the second year (2017), the
company had a net income of P100,000 and Juan
withdrew P10,000 for personal use. Compute for the
ending capital balance of Juan for the year 2017.
P65,000
5. Owner Juana invested P100,000 to start her
laundry business. During the first year of
operations (2016), the company had a net income
of P15,000. Juana invested additional P100,000 to
grow the business. In 2017, the business earned
P50,000. As of December 31, 2017, Juana’s capital
balance is P200,000. How much is Juana’s
withdrawal?
P165,000
6. The following balances were retrieved from the
records of Juan’s Janitorial Services for the year
ended December 31, 2016:

Capital, January 1, 2016 P 500,000

Withdrawals 100,000
Additional Investments 50,000
Net Loss 45,000

Prepare the Statement of Changes in Equity.

DJYSMNHS

ASSIGNMENT
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Statement of Changes in Equity
ADVANCING CAPABILITY AND POTENTIAL OF KNOWING BUSINESS AND ACCOUNTING PRACTICE
what to do?

STEP 1 STEP 2 STEP 3 STEP 4

Identify at 1. Since when did you Ask the owner Make a summary
least one start your business? their initial and discussion
business in 2. Do you have an (beginning) report of your
your accounting practice? capital, interview and
community/lo 3. Do you maintain a
additional prepare a SCE
cality. book of accounts?
investment, given the data
(Single/Sole 4. Is your accounting
income, and that you need.
Proprietorship) period m/q/sa/a?
withdrawals?
rubrics in rating activity