STATEMENT OF CHANGES IN EQUITY Purpose of this

STATEMENT OF CHANGES IN EQUITY Purpose of this statement; To account for transactions between the entity and its owners, for example: Additional contributions/capital Repayment of contributions/capital Total comprehensive income Salaries paid Interest paid/ received Distribution to members

Information reflected in the Statement of changes in equity: Opening balances of all components of equity movements during the current year Closing balance of all the components of equity (much like when you prepare the PPE Note!)

Components of equity: EXAMPLES • Member’s contribution/share capital • Revaluation surplus • Retained earnings

Movements of equity during the year: EXAMPLES Net profit after tax (will increase your retained earnings) Distributions to members/Dividends (will reduce your retained earnings) Surplus on revaluation of asset (will increase your revaluation surplus)

Closing balance of components of equity This will be your reconciled amount after the effect of the movements during the year

Exercise Member’s Revaluation contribution Surplus Retained earnings Total Equity 500 0 136 830 636 830 Additional contributions 0 0 Repayment of contributions 0 0 Total comprehensive income 0 250 000 542 375 792 375 Salaries paid 0 0 (384 000) Interest paid 0 0 (5 600) Interest received 0 0 2 800 Distribution to members 0 0 (200 000) 500 000 250 000 92 405 Balance at 01 January 2001 Balance at 31 December 2001 (200 000) 842 405

Typical examination question: The following information relates to Prince CC for the year ended 31 December 2018. Use the information to draw up a Statement of changes in equity for the year ended 31 December 2018. (10 Marks)

R R Member’s contribution 13 500 Surplus on revaluation of land building 30 000 Loans from members Prince 375 000 Eddie 450 000 Mortgage bond 150 000 Land building at valuation 450 000 Inventory 660 000 Debtors 990 000 Cash and bank Retained earnings 01 January 2018 Net profit before tax 50 000 120 000 97 500

Additional information: 1. Prince and Eddie are the only members of the corporation 2. The land building was revalued on 31 July 2018 3. The provision for normal tax is R 34 122 4. The members decided on a distribution of R 180 000 for the year

Solution: Prince CC Statement of changes in equity for the year ended 31 December 2018 Member’s Contribution Revaluation Surplus Retained earnings TOTAL Balance at 01 January 2018 13 500 0 120 000 133 500 Total comprehensive income 0 30 000 63 378 93 378 Distribution to members 0 0 (180 000) Balance at 31 December 2018 13 500 30 000 3 378 46 878