What is a Statement of Shareholders’ Equity?

Statement of Shareholders’ Equity

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Statement of Shareholders’ Equity

The Statement of Shareholders’ Equity, sometimes called the Statement of Changes in Shareholders’ Equity or simply the Equity Statement, is one of the main financial statements of a corporation. It provides a comprehensive overview of the changes in a company’s equity over a specific period of time. This statement is especially important for corporations because they can have various equity components due to the issuance of different classes of shares and other equity-related instruments.

In essence, the Statement of Shareholders’ Equity chronicles the activity in each major equity account for a specified period. Typical equity accounts include:

Here’s a basic layout of a Statement of Shareholders’ Equity:

Example of a Statement of Shareholders’ Equity

Let’s delve into a fictional scenario for a corporation named “TechNova Corp.” This company has Common Stock, Preferred Stock, Additional Paid-in Capital, Retained Earnings, and Accumulated Other Comprehensive Income. For the sake of this example, let’s assume that during the year:

Here is the Statement of Shareholders’ Equity for TechNova Corp for the Year Ended December 31, 2023:

TechNova Corp: Statement of Shareholders’ Equity For the Year Ended December 31, 2023

Common StockPreferred StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive IncomeTotal Equity
Balance, January 1, 2023$100,000$50,000$150,000$200,000$5,000$505,000
Issuance of common stock$20,000$80,000$100,000
Net Income$60,000$60,000
Common Dividends declared($15,000)($15,000)
Preferred Dividends declared($5,000)($5,000)
Other Comprehensive Income$10,000$10,000
Balance, December 31, 2023$120,000$50,000$230,000$240,000$15,000$655,000

In this example:

  • Common Stock: Began at $100,000 and increased by $20,000 due to the issuance of new stock, ending at $120,000.
  • Preferred Stock: Remained unchanged at $50,000 since no new preferred shares were issued or repurchased.
  • Additional Paid-in Capital (APIC) : Started at $150,000 and increased by $80,000 with the new common stock issuance, reaching $230,000 by year-end.
  • Retained Earnings: Started at $200,000, increased by net income of $60,000, but decreased by total dividends of $20,000 ($15,000 for common and $5,000 for preferred), ending at $240,000.
  • Accumulated Other Comprehensive Income : Began at $5,000 and increased by $10,000 due to changes in the value of financial market investments, closing the year at $15,000.

Adding up all the components, the total shareholders’ equity at the beginning of the year was $505,000 and increased to $655,000 by the end of the year.

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