Statement of changes in equity

As a part of the Annual Report there’s always the statement of changes in equity presented. It’s not a statement on it’s own in your accounting, but in the Report it shows movements that happened in the equity accounts during the period. There aren’t many equity accounts, but nonetheless, they are important to a company. It’s the company’s capital, it’s reserves and it’s retained earnings. It’s what shows how viable a company is more or less. 

List of transactions that are done to equity accounts and which are shown on the statement of changes in equity:

  • Profit or loss for the period goes to the retained earnings;
  • As required by your local accounting standards some expenses and incomes are recognized directly in respective equity accounts;
  • Effects of changes in accounting policies and correction or errors recognized within the equity (usually done to retained earnings); and
  • Dividend payments or other form of equity distributions that happened over the period.

I should point out that the list is not exhaustive and there may be other transactions you made to equity accounts. However, as it happens, they are those that are more common and should be disclosed on the statement.