Definitions and sources of owner’s, partners’ and stockholders’ equity:
February 6, 2009 by Admin
Filed under Accounting
Ownership equity is the residual interest in the assets of the entity after deducting all its liabilities. In the accounting equation as presented in the balance sheet, equity equals assets minus liabilities. This means that ownership equity is composed of all the entity’s resources which are not obtained from debts. In other words, it consists of all the resources derived from owners’ contribution.
Equity differs depending on the structure of an entity. A sole proprietorship which is owned solely by a proprietor presents its equity as an owner’s equity. Accounting for owner’s equity in a single proprietorship is simple. Owner’s equity in this form is increased when the owner contributes capital or realizes net profit. It is then decreased when the owner draws capital or incurred a net loss. Read more
Knowing and understanding what is Statement of Changes in Equity
February 4, 2009 by Admin
Filed under Accounting
A statement of changes in equity shows all changes in owner’s equity for a period of time. According to IAS 1, this statement of financial reporting is one the five components of complete financial statements (balance sheet, income statement, statement of changes in equity, statement of cash flow and notes to financial statements.
IAS 1 requires an entity to present a statement of changes in equity as a separate component of the financial statements. The statement must show: [IAS 1.96]
(a) profit or loss for the period;
(b) each item of income and expense for the period that is recognised directly in equity, and the total of those items; Read more
