Statement of Shareholders’ Equity
A Statement of Shareholder/">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 Shareholder/">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