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1. External financial reporting decisions
1.1 Financial statements
1.1.1 Learning outcome
1.1.2 Introduction to external financial reporting
1.1.3 Statement of financial position
1.1.4 Statement of comprehensive income
1.1.5 Statement of changes in equity
1.1.6 Statement of cash flows
1.1.7 Cash flow preparation
1.1.8 Notes to the financial statements
1.1.9 Consolidated financial statements
1.1.10 Integrated reporting
1.2 Financial transactions
2. Planning, budgeting, and forecasting
3. Performance management
4. Cost management
5. Internal control
6. Technology and analytics
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1.1.5 Statement of changes in equity
Achievable CMA Part 1
1. External financial reporting decisions
1.1. Financial statements
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Statement of changes in equity

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The Statement of Changes in Equity is a financial statement that explains the movements from the previous comparative balances of the accounts that make up a company’s equity.

As mentioned in the previous section, this financial statement “bridges” two consecutive balance sheets and both the ending and beginning balances should agree to the balance sheets they are based on.

Below is an example of a statement of changes in equity normally prepared using a columnar format:

Proforma statement of changes in equity
Proforma statement of changes in equity

The movements in net income and other comprehensive income should be directly traceable to the Statement of Comprehensive Income.

The inclusion of the Comprehensive Income items in the Statement of Changes in Equity shows the final step of the accounting cycle wherein we close the temporary accounts to either Retained Earnings (for the net income) or to Accumulated Other Comprehensive Income (for OCI).

Statement of Changes in Equity

  • Explains movements in equity account balances between two balance sheets
  • Bridges beginning and ending equity balances; must match related balance sheets
  • Prepared in columnar format for clarity

Components and Traceability

  • Movements in net income and other comprehensive income (OCI) traceable to Statement of Comprehensive Income
  • Comprehensive income items included to show closing of temporary accounts:
    • Net income closed to Retained Earnings
    • OCI closed to Accumulated Other Comprehensive Income

Role in Accounting Cycle

  • Represents final step: closing temporary accounts to equity accounts
  • Ensures all changes in equity are documented and reconciled

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Statement of changes in equity

The Statement of Changes in Equity is a financial statement that explains the movements from the previous comparative balances of the accounts that make up a company’s equity.

As mentioned in the previous section, this financial statement “bridges” two consecutive balance sheets and both the ending and beginning balances should agree to the balance sheets they are based on.

Below is an example of a statement of changes in equity normally prepared using a columnar format:

The movements in net income and other comprehensive income should be directly traceable to the Statement of Comprehensive Income.

The inclusion of the Comprehensive Income items in the Statement of Changes in Equity shows the final step of the accounting cycle wherein we close the temporary accounts to either Retained Earnings (for the net income) or to Accumulated Other Comprehensive Income (for OCI).

Key points

Statement of Changes in Equity

  • Explains movements in equity account balances between two balance sheets
  • Bridges beginning and ending equity balances; must match related balance sheets
  • Prepared in columnar format for clarity

Components and Traceability

  • Movements in net income and other comprehensive income (OCI) traceable to Statement of Comprehensive Income
  • Comprehensive income items included to show closing of temporary accounts:
    • Net income closed to Retained Earnings
    • OCI closed to Accumulated Other Comprehensive Income

Role in Accounting Cycle

  • Represents final step: closing temporary accounts to equity accounts
  • Ensures all changes in equity are documented and reconciled

More from Financial statements

  • Learning outcome
  • Introduction to external financial reporting
  • Statement of financial position
  • Statement of cash flows
  • Notes to the financial statements