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Companies and financial accounting
Companies and financial accounting

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5.3 Statement of changes in equity

Below is the statement of changes in equity for Cleopatra Ltd. The statement of changes in equity shows how the change in the equity section of the statement of financial position of a company has come about. It shows the increase due to profit for the year. It also shows the decrease due to dividend payments during the year. It would also show any increase due to new share issues.

Cleopatra Ltd Statement of changes in equity for the year ended 28 February 20X9
     
Shares Retained earnings Total equity
  £ £ £
Balance as at 1 March 20X8 80,000 33,300 113,300
Dividends paid   ( 2,400) ( 2,400)
Total profit for the year   76,200 76,200
Balance as at 28 February 20X9 Total 80,000 Total 107,100 Total 187,100

You have now been introduced to the formats of the three main company financial statements: the statement of financial performance, the statement of financial position and the statement of changes in equity. To recap, the statement of financial performance shows, in detail, the company’s financial performance over the year and shows the profit or loss to be included in the retained earnings reserve in the statement of financial position and the statement of changes in equity.

Activity 12 Memorising financial statements formats

Timing: Allow about 60 minutes

The purpose of this activity is to gain practice at writing out the financial statement formats and to memorise their layouts.

Write out by hand the headings of the layouts for:

  • the statement of financial performance
  • the statement of financial position
  • the statement of changes in equity.

Do this a few times in order to memorise their layouts or formats.

Note that there is no feedback for this activity.