What is the purpose of a statement of changes in equity? What is the connection between...

What is the purpose of a statement of changes in equity? What is the connection between this statement, statement of financial position and statement of profit or loss and other comprehensive income?

Expert Solution

The purpose of a statement of changes in equity as the name suggests is to show the change or movement in the amount of shareholders’ equity during a given period and the reasons for the said change.

The change in equity may be caused by additional capital issued, net income or loss during the period, any distributions by way of dividends, etc.

The statement of changes in equity begins with the equity balance at the beginning of the period which is the ending balance per the previous statement of financial position, and is then adjusted for the net income or loss per the statement of profit or loss and other comprehensive income and capital additions or dividends if any. The ending balance in the statement of changes in equity is then reported in the statement of financial position prepared at the end of the period.

The statement of changes in equity is thus connected to both the statement of financial position and the statement of profit or loss and other comprehensive income.

ekkarill92 answered 1 year ago

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