Hi, Else here.
And in our previous videos we did
the issue of shares, cash dividend, and the stock
dividend.
What we're doing right now is we're
going to do the statement of changes in equity.
We'll then use a statement of changes in equity
in order to complete the shareholder's equity
section of the balance sheet/statement
of financial position.
Let's get to it.
At the end of our last video, we did a total
for each of the T-accounts.
This will give us the necessary information
to create the statement of changes in equity.
Make sure you have this information listed down,
because I'm not going to refer back to.
The statement of changes in equity
is always in column form.
It starts with the title, which includes
the name of the corporation, the name of the statement,
and the date.
In this case, it's a period of time, so we have to state year
ended.
The columns go in the same order as the accounts go in
for the statement of financial positions/balance sheet,
the shareholders' equity section, which
means that we start with preferred shares,
move on to common shares, contributed surplus, retained
earnings, and then a total.
Preferred shares and common shares
both have the number of shares and the capital amount.
We then move on to contribute surplus, also called
contributed capital.
Finally, retained earnings.
There is also a total account, but you
can see that I've run out of space,
so be aware there should be a total account.
I'll do it on a separate page.
We always start with opening balances.
This is totally taken from the T-accounts.
Then all the business transactions
that actually occurred that affected anything
having to do with equity.
We had the issue of shares, which increased common shares.
If we had our total account here,
we would add that to the total.
Next, we had a cash dividend.
Cash dividends go under retained earnings.
We also had a stock dividend.
I'm going to move the page up a little.
The stock dividend increased common shares
and decreased the retained earnings.
Again, all this information is taken from the T-accounts.
Finally, we had profit--
also called net income.
That impacts the retained earnings increasing it.
At the end is the balance at the end of the year.
Note that there would be a total column.
What would the total column look like?
I'm going to show it underneath here.
Notice that this 0 is the stock dividend, because a stock
dividend causes retained earnings
to go down and common shares to go up by the exact same amount.
The net of those two amounts is 0.
Notice that this total is the addition both across
here as well as down here.
You know that if the addition doesn't
work in both directions, you've done something wrong.
That is a statement of changes in shareholders' equity.
We're going to use that information
to create the shareholders' equity section of the balance
sheet, also called the statement of financial position.
I'm going to start with the title, shareholders' equity,
at a subtitle, contributed capital, then share capital.
Now I start listing the same items
as on the statement of changes in equity
in the same order, and the amount, moving on.
I'm now going to add common shares.
I now provided total, share capital,
additional contributed capital, which
is the contributed surplus, also called contributed capital.
That will give me total contributed capital.
Moving the page up a little, I now add retained earnings.
And that will provide me with total shareholders' equity.
Looking at that together, note that we
start with the shareholders' equity, move on to
contributed capital.
Once we have the total contributed capital,
we then add in the retained earnings
to get the total shareholders' equity.
And that is the statement of financial position,
also called the balance sheet, shareholders' equity section.
I'll see you in the next video.