Account that changes most often within equity

Accounts within the equity that change most often are those which have their figures being changed without any specific decision required from the owners alongside with legislative bureaucracy. Whilst making payments into share capital and other reserves are structured by agreements between owners (if there are any), by articles of association and so on, there’s an account that changes without any of this. 

The equity account that changes most often is in fact called ‘retained earnings’. Retained earnings are changing mostly from two activities – (1) from your company’s performance (profit or loss for the period is added to the retained results making this a cumulative amount from the beginning of incorporating the company) and (2) from paying dividends to owners (only possible if the retained earnings is a positive amount, that is there are rewards the owners can take out of the company).

It should be mentioned that deciding on adding the result for the period within the earnings is something that’s normally done via approving annual accounts and that’s that. During the period, each month the result is added to retained earnings (or if a separate account within equity, shown as ‘profit (loss) for the period’). Paying dividends is again something which the owners decide to do with a simple decision taking into account agreements between owners, should there by any.