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Module 11, Shareholders' Equity, Video 3 - YouTube
Channel: Else Grech Accounting
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hi else here and in our previous videos
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we did the issue of shares cash dividend
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in a stock dividend what we're doing
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right now is we're going to do the
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statement of changes in equity will then
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use the statement of changes in equity
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in order to complete this shareholders
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equity section of the balance sheet /
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statement of financial position let's
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get to it at the end of our last video
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we did a total for each of the
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t-accounts this will give us the
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necessary information to create the
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statement of changes in equity make sure
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you have this information listed down
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because I'm not going to refer back to
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it the statement of changes in equity is
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always in column form it starts with the
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title which includes the name of the
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corporation the name of the statement
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and the date in this case it's a period
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of time so we have to state year ended
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the columns go in the same order as the
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accounts go in for the statement of
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financial position / balance sheet the
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shareholders equity section which means
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that we start with preferred shares move
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on to common shares contributed surplus
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retained earnings and then a total
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preferred shares and common shares both
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have the number of shares and the
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capital amount we then move on to
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contributed surplus also called
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contributed capital finally retained
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earnings there is also a total account
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but you can see that I've run out of
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space so be aware there should be a
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total account I'll do it on a separate
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page we always start with opening
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balances this is totally taken from the
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t-accounts then all the business
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transactions that actually occurred that
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affected anything having to do with
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equity we had the issue of shares which
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increased common shares if we had our
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total account here we would add that to
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the total next we had a cash dividend
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cash dividends go under retained
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earnings we also had a stock dividend
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I'm going to move the page up a little
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the stock dividend increased common
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shares and decrease the retained
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earnings again all this information is
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taken from the t-accounts finally we had
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profit also called net income bad
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impacts the retained earnings increasing
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it at the end is the balance at the end
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of the year note that there would be a
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total column what would the total column
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look like
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I'm going to show it underneath here
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notice that this 0 is the stock dividend
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because a stock dividend causes retained
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earnings to go down and common shares to
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go up by the exact same amount the net
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of those two amounts is zero notice that
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this total is the addition both across
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here as well as down here you know that
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if the addition doesn't work in both
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directions you've done something wrong
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that is a statement of changes in
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shareholders equity we're going to use
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that information to create the
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shareholders equity section of the
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balance sheet also called the statement
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of financial position I'm going to start
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with the title shareholders equity add a
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subtitle contributed capital then share
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capital now I start listing the same
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items as on the statement of changes in
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equity in the same order and the amount
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moving on I'm now going to add common
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shares I now provide a total share
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capital additional contributed capital
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which is the contributed surplus also
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called contributed capital that will
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give me total contributed capital moving
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the page up a little I now add retained
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earnings and that will provide me with
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total shareholders equity looking at
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that together note that we start with
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the shareholders equity move on to
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contributed capital once we have the
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total contributed capital we then add in
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the retained earnings to get the total
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shareholders equity and that is the
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statement of financial position also
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called the balance sheet shareholders
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equity section I'll see you in the next
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video
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