Statement of Shareholders’ Equity

A Statement of Shareholders’ Equity is a financial report that outlines the changes in a company’s equity over a specific period. It provides details about the equity components such as common Stock, preferred stock, additional paid-in Capital, Retained Earnings, and treasury stock. This statement helps investors understand how equity is affected by Net Income, dividends, and other transactions.

For example, if a company issues new shares, this would increase the common stock and possibly additional paid-in capital. Conversely, if the company pays dividends, retained earnings would decrease. The statement typically includes:

• Beginning balance of equity
• Additions (e.g., net income, new equity issued)
• Subtractions (e.g., dividends, treasury stock purchases)
• Ending balance of equity

In a case where a company starts with $1,000,000 in equity, earns $200,000 in net income, pays $50,000 in dividends, and issues $100,000 in new shares, the Statement of Shareholders’ Equity would reflect:

• Beginning Equity: $1,000,000
• Add: Net Income: $200,000
• Less: Dividends: ($50,000)
• Add: New Shares Issued: $100,000
• Ending Equity: $1,250,000