How to Use the Statement of Owner's Equity
A statement of owner's equity is a very common financial statement used by most companies. This statement shows all owners of a business the amount of equity they began the period with, any changes to their equity and their ending equity balances. The ending equity amounts are used in completing the balance sheet, which is another common financial statement all businesses use. Equity simply represents an owner's rights to the assets a business owns.
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Instructions
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Place the beginning owner's equity amount on the top of a financial statement. If there is more than one owner, list each owner in a separate column at the top of the financial statement and each owner's beginning equity amount.
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Add in any contributions made by owners. Place each amount in individually based on what was contributed and the dollar value. Contributions can be either monetary or a donation of an asset. Net profits from the company are added in at this point as well. All net profits increase the owner's equity in the business. Add all contributions to the beginning equity amount. This amount is placed on the next line.
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Deduct any withdrawals made by owners. Each owner's withdrawals should be listed individually and can be monetary or a withdrawal of an asset. If the company suffered a net loss, this amount is deducted from the owner's equity at this point. Net losses result in the reduction of the owner's equity. Deduct all withdrawals from the owner's equity amounts. The resulting figure is the owner's ending equity amounts for the end of the period.
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Analyze the statement to see exactly where equity amounts derived from. Business owners and investors can tell if the company's equity increased based on owners' contributions or on profits made by the company.
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References
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