Stockholder's Equity

Question 1

What is the Statement of Stockholders Equity?

Answer 1

Statement of stockholder’s equity displays how equity changes from the beginning of an accounting period to the end. It displays all equity accounts that affect the ending equity balance including common stock, net income, paid in capital, and dividends.

In other words, the statement of stockholder’s equity is a basic reconciliation of how the ending equity is calculated. How did the equity balance on January 1 turn into the equity balance on December 31?

First, the beginning equity is reported followed by any new investments from shareholders along with net income for the year. Second all dividends and net losses are subtracted from the equity balance giving you the ending equity balance for the accounting period.

Question 2

What are the 4 sections of the statement of stockholders equity?

Answer 2

— Beginning balance (Jan 1)
— Additions (new investments and net income if profitable)
— Subtractions (if not profitable net loss for the year along with any dividends to the owners.
— Ending Balance (Dec 31)