ACCOUNTING TUTORIALS
Part I Financial Statements and Basic Accounting Principles
Statement of Changes in Owners' Equity
The statement of changes in owners’ equity may also be called the statement of changes in retained earnings, or the statement of changes in capital stock.
This financial statement has something important in common with the income statement, namely that it focuses on a period of time.
Below is a sample statement of changes in owners’ equity, for an imaginary computer firm. The period of time covered is the fiscal year ending March 31, 2006.
There are two main elements of the owners’ equity explained by the statement: paid-in capital and retained earnings.
Paid-in capital is the amount that the entity’s owners have invested in it. (For a publicly traded company, the “owners” will be shareholders.)
Retained income is the net income that the entity retains for use.
Additional definitions:
Common stock: the number and total value of shares issued to stockholders.
Additional paid-in capital: money that a company receives from investors in addition to the stated value of the stock
Dividends: distributions of earnings to stockholders.
