Statement of changes in equity
How each part of shareholders’ equity moved during the year: profit, other gains, dividends and share issues.
ACCA exams this helps with: FA Financial Accounting FR Financial Reporting See the ACCA map
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A table that shows why the owners’ share of the company (equity) changed during the year. Each column is one part of equity, such as share capital or retained earnings. Each row is one reason for a change, such as profit or dividends. It starts with the opening balance and ends with the closing balance on the balance sheet.
Example. Retained earnings start the year at £1,650,000. Profit adds £480,000. Dividends paid to shareholders take away £150,000. Retained earnings end the year at £1,980,000.
Key words
- Share capital
- The money shareholders paid the company for its shares, measured at the shares’ nominal (face) value.Example: 1,000,000 shares of £1 each gives share capital of £1,000,000.
- Retained earnings
- The total profits a company has made over its life and kept in the business, instead of paying them out as dividends.Example: Retained earnings of £12,000 in the statement of financial position.
- Dividend
- A payment of profit from a company to its shareholders. It reduces retained earnings. It is not an expense.Example: A company with £480,000 of profit pays dividends of £150,000 and keeps £330,000.
- Total comprehensive income
- Profit for the year plus other comprehensive income. It is the total change in equity from the company’s performance in the year, before dividends and share issues.Example: Profit £480,000 + revaluation gain £150,000 = total comprehensive income £630,000.
- Revaluation surplus
- The part of equity that holds the gains from revaluing assets upwards. The gains are not counted as profit.Example: A building revalued from £400,000 to £600,000 creates a £200,000 revaluation surplus.
The statement, explained
| Share capital £000 | Revaluation surplus £000 | Retained earnings £000 | Total £000 | |
| Balance at 1 January 20242 | 1,000 | – | 1,350 | 2,350 |
| Profit for the year | – | – | 420 | 420 |
| Dividends paid | – | – | (120) | (120) |
| Balance at 31 December 20243 | 1,000 | – | 1,650 | 2,650 |
| Profit for the year4 | – | – | 480 | 480 |
| Other comprehensive income: revaluation gain5 | – | 150 | – | 150 |
| Total comprehensive income for the year6 | – | 150 | 480 | 630 |
| Dividends paid7 | – | – | (150) | (150) |
| Balance at 31 December 20258 | 1,000 | 150 | 1,980 | 3,130 |
What each numbered line means
- Heading. This is the third main statement for a company. It explains why each part of equity is different at the end of the year from the start. Figures are in £000.
- Columns and opening balance. Each column is one part of equity, and the Total column adds them. Real statements show last year too, so the table starts at 1 January 2024.
- Last year’s closing balance. These figures must match equity in last year’s statement of financial position (the 2024 column): share capital 1,000, retained earnings 1,650, total 2,650.
- Profit for the year. Taken from the statement of profit or loss. Profit belongs to the shareholders, so it increases retained earnings.
- Other comprehensive income. The £150 revaluation gain from the second part of the statement of profit or loss and OCI. It goes into the revaluation surplus column, not retained earnings.
- Total comprehensive income. Profit plus OCI, 630. It matches the last line of the statement of profit or loss and OCI.
- Dividends paid. Profit paid out to shareholders. This is the only statement where dividends appear as a line in equity. They are never an expense.
- Closing balance. These must match equity in this year’s statement of financial position: 1,000 + 150 + 1,980 = 3,130.
How to read it
- Did the shareholders put in new money? Share capital is unchanged at 1,000, so no new shares were issued.
- How much profit was kept? Profit 480 − dividends 150 = 330 kept, which is 69% of the year’s profit.
- Dividend cover: profit 480 ÷ dividends 150 = 3.2 times. The dividend is well covered by profit.
- Why equity rose: total equity went from 2,650 to 3,130. That is 480 of profit plus a 150 revaluation gain, minus 150 of dividends.
Watch it explained
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Videos from YouTube tutors
These videos are made by independent tutors on YouTube, not by Trial Balance. Some use US terms or older exam names (for example F7 for FR), but the principles are the same.
How to make it yourself
Every figure comes from statements you already have. No new calculations are needed.
- Set up the columns: one for each part of equity in the statement of financial position (share capital, revaluation surplus, retained earnings), plus a Total column.
- Opening balances: copy equity from last year’s statement of financial position.
- Profit for the year: from the statement of profit or loss, in retained earnings.
- Other comprehensive income: from the OCI section, in the reserve it relates to (here, the revaluation surplus).
- Dividends paid: from the trial balance, deducted from retained earnings.
- Share issues: if new shares were issued, add the nominal value to share capital (and any premium to a share premium column).
- Add down each column to get the closing balances, then add across to check the Total column.
- Check: the closing balances must match equity in this year’s statement of financial position.
Fill it in yourself
Type or choose your answers, then press Check answer. Questions with a New numbers button can be repeated with different figures.