Lecture Notes: Statement of Changes in Equity for Sherry Shuttles

Overview

• Purpose: Explains changes in shareholders' equity during the year.
• Focuses on how equity accounts have changed.

Statement Title

• Format:
  • Company Name: Sherry Shuttles
  • Statement Name: Statement of Changes in Equity
  • Date: For the year ended December 31st, 2024
• Alternative Names:
  • Statement of Changes in Shareholders Equity
  • Statement of Retained Earnings (related statement)

Equity Accounts

• Intro Class Coverage:
  • Only two equity accounts: Common Shares and Retained Earnings
• Intermediate Level:
  • Can include Preferred Shares and other equity accounts

Equity Accounts Setup

• Columns:
  • Common Shares
  • Retained Earnings
  • Totals Column
• Initial Values (January 1, 2024):
  • Common Shares: $60,000
  • Retained Earnings: $10,000
  • Total: $70,000

Changes in Equity

• Common Shares:
  • No changes during the year
  • Company did not issue or repurchase any shares
• Retained Earnings:
  • Adjustments: Add net income, Deduct dividends
  • Net Income: $20,700 (from the income statement)
  • Dividends: $3,000

End of Year Values (December 31, 2024)

• Common Shares: $60,000 (unchanged)
• Retained Earnings:
  • Start: $10,000
  • Add Net Income: $20,700
  • Subtract Dividends: $3,000
  • End: $27,700
• Total Equity: $87,700
  • Methods:
    • Vertical calculation: $70,000 + $20,700 - $3,000
    • Horizontal calculation: $60,000 + $27,700

Formatting

• Double underlines under final amounts
• Dollar signs:
  • At the top of each column
  • Beside the bottom line of financial statement

Next Steps

• Next lecture will cover the Balance Sheet.