LEARNING ACTIVITY SHEET

QUARTER First / SEMESTER First

Name: __________________________________________________ Score: _______

Grade & Section: ________________________________________ Subject: FABM 2

Name of Teacher: ___________________________________ Date: _____________

I. Title: Preparation of Statement of Changes in Equity (SCE) for a Single Proprietorship
II. Type of Activity:         Concept notes with formative activities

LAS for summative assessment ( Written Work Performance Task)

III.MELC: Prepare an SCE for a single proprietorship (ABM_FABM12- Ie-9).

IV. Learning Objective/s:

 Identify and describe the different elements of Statement of Changes in Equity

(SCE);
 Distinguish the differences among the forms of business organizations; and
 Prepare Statement of Changes in Equity (SCE) for a sole proprietorship.

V. Reference/s:

Print Material/s:
 
Ballada, W. (2014) DomDane Publishers, Manila, Basic Accounting, pp 3-10/3-
16
Beticon, J. L. Domingo, J. C. D. & Yabut, F. A. D. (2016) Vibal Group Inc.,
Quezon City, Fundamentals of Accountancy, Business and Management 2,
pp 53-64
Empleo, P.& Robles N., (2019) Millenium Books Inc., Mandaluyong City, The
Philippine Financial Reporting, pp 111-115
Online Resource/s:
Harcourt, H. (2020). Characteristics of Partnerships. Retrieved at
https://www.cliffsnotes.com/study-guides/accounting/accountingprinciples
ii/partnerships/characteristics-of-a-partnership on August 20, 2020.

Pagayanan, R. (2019). A peek into the revised Corporation Code of the

Philippines. Business World. Retrieved from:
https://www.inhousecommunity.com/article/peek-revised-corporation-
code-philippines/#:~:text=its%20corporate%20secretary.-
,Perpetual%20existence,in%20the%20Articles%20of%20Incorporation on
August 22, 2020.

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VI. Concept Notes

Statement of Changes in Equity

A statement of changes in equity shows the movement of cash equity component
during a reporting period. This also summarizes the changes that occurred in owner’s
equity. Changes in an enterprise’s equity between two balance sheet dates reflect the
increase or decrease in its net assets during the period.

Business entity concept is a prevailing assumption in accounting. It states that the

transactions of the business must be distinguished and differentiated from the
transactions of the owners.

Statement of changes in equity applies to the different business organizations:

sole proprietorship, partnership and corporation. A sole proprietorship is owned by
one person. Its owner is called a sole proprietor. In most cases, the sole proprietor is
also the general manager of the business. Sole proprietorships tend to be small service-
type businesses and retail establishments. The owner receives all profits, absorbs all
losses and is solely responsible for all debts of the business. Sole proprietorships have
limited life, meaning, operation depends on the decision of the owners. From the
accounting viewpoint, the sole proprietorship is distinct from it proprietor. Thus, the
accounting records do not include the proprietor’s personal financial records. Below is a
sample of SCE for a sole proprietorship:
Liza Uy Apparels
Liza Uy Apparels
Statement of Changes in Owner's Equity Statement of Changes in Owner's Equity
For the year ended December 31, 2018 For the year ended December 31, 2018

Uy Capital, Beginning P xx
Add: Additional investment xx Uy Capital, Beginning P xx
Net income xx xx Add: Additional investment xx
Total xx Total xx
Less: Uy Drawings xx Less: Uy Drawings xx
Uy Capital, Ending P xx Net Loss xx xx
Uy Capital, Ending P xx

Illustration 1.1 Illustration 1.2

• The equity/capital beginning balance is the opening balance of the owner’s
equity. This is the ending balance in the previous year.

• Additional investments pertain to any capital infusion made by the owner for
the year.

• Net income pertains to the amount earned by the sole proprietorship for the year
and this is taken from the statement of comprehensive income.

• Net loss occurs when expenses exceed the total revenue for a given period of
time.
• Drawing represents the owner’s return of investment.
• Equity/capital ending represents the owner’s equity balance at the end of the
year. This is a real account thereby making this the balance for next year’s equity/capital
beginning.

Partnership, on the other hand, is a business owned and operated by two or more
persons who bind themselves to contribute money, property or industry to a common
fund, with the intention of dividing the profits among themselves. Each partner is
personally liable for any debt incurred by the partnership. Accounting considers the
partnership as a separate organization, distinct from the personal affairs of each partner.

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The life of a partnership may be established as a certain number of years through

the partnership agreement. However, if no such agreement is made, the death, inability
to carry out specific responsibilities, bankruptcy or the desire of a partner to withdraw
automatically terminates the partnership. Below is a sample of a statement of changes in
equity for partnership.
XYZ Partnership
Statement of Changes in Partners Equity
For the year ended December 31, 2018

Partner X Partner Y Partner Z Total

Partner's Equity, Beginning P xx P xx P xx P xx
Add: Share in net income xx xx xx xx
Additional investments xx xx xx xx
Total xx xx xx xx
Less: Withdrawals xx xx xx xx
Partner's Equity, Ending P xx P xx P xx P xx

Illustration 1.3
In partnership, net income or net loss is divided among the partners depending
on their partnership agreement. Partners may also give themselves salaries for their
respective work done, interest to their investments and bonus as incentive especially to
partners managing the business. However, bonus is generally given when the entity earns
net income.

Corporation is a business owned by the stockholders. It is an artificial being

created by operation of law, having the rights of succession and the powers, attributes
and properties expressly authorized by law or incident to its existence. The stockholders
are not personally liable for the corporation’s debts because a corporation is a separate
legal entity.

A corporation’s unit of ownership is called a stock. Every corporation is authorized

to issue certain number of stock and this authorized stock is the maximum amount that
they can issue. The stock or unit of corporate ownership is represented by a stock
certificate. This stock certificate oftentimes has an amount on its face called par value.
Par value is synonymous to the amount of money printed in the Philippine bills.

Under the old Corporation Code of the Philippines, a corporation has a term limit
of 50 years but can be extended. The new Corporation Code of the Philippines has a
default rule that a corporation shall have perpetual existence unless otherwise stated in
the Articles of Incorporation.

The statement of changes in equity for a corporation as presented in the illustration

below has the following elements:

 Share capital- refers to funds that a company raises from selling shares to
its investors. There are two general types of share capital: ordinary shares
and preference shares.

 Share premium- represents the difference between the par value of shares
issued and the subscription or issue price. Example if your company’ stock
par value is P100 per share and you sold it for P110 per share, the P10
excess is the share premium.

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 Retained Earnings- amount of profit that a company has earned to date

minus the dividends or other distributions to investors.

 Dividends- often refers to cash dividends that a corporation pays to its

stockholders/shareholders.
Macro Corporation
Statement of Changes in Equity
For the year ended December 31, 2018

Share Share Retained

Total
Capital Premium Earnings
Balance beginning P xx P xx P xx P xx
Add: Additional stock issuance xx xx xx xx
Net income xx xx xx xx
Total xx xx xx xx
Less: Dividends xx xx xx xx
Balance ending P xx P xx P xx P xx

Illustration 1.4

VI. Summative Assessment

A. Let’s Get Started. Read the questions carefully. Write the letter of your choice on the
answer sheet provided.
1. Which of the following is not a component of statement of changes in equity for a
sole proprietorship?
a. Total comprehensive income for the period
b. Dividends paid to shareholders during the period
c. Owner’s return of investment
d. Added capital of owners
2. Which of the following are the major types of business organizations?
I. Sole proprietorship
II. Merchandising business
III. Partnership
IV. Corporation
a. I, II, III b. II, III, IV c. I, III, IV d. I, II, IV

3. How do you call owners of a corporation?

a. Sole proprietors
b. Shareholders/stockholders
c. Partners
d. Stakeholders

4. Which of the following arranges the business organizations according to

complexity of operations?
a. Corporation, Partnership, Sole Proprietorship
b. Partnership, Corporation, Sole Proprietorship
c. Sole Proprietorship, Partnership, Corporation
d. Sole Proprietorship, Corporation, Partnership

5. Which of the following relates to the saying “two heads are better than one”?
a. Corporation
b. Partnership
c. Sole Proprietorship
d. Service

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6. What form of business organization puts the least risk on its owners?
a. Corporation
b. Partnership
c. Sole Proprietorship
d. Service
7. What form of business organization is owned by only one person?
a. Corporation
b. Partnership
c. Sole Proprietorship
d. Service
8. A partnership is composed of how many members?
a. One only
b. Two or more
c. Five or more
d. Two but not more than four

9. Which of the following arranges the ease of organization from most difficult to the
easiest?

a. Sole proprietorship, Partnership, Corporation

b. Partnership, Sole Proprietorship, Corporation
c. Corporation, Partnership, Sole Proprietorship
d. Sole Proprietorship, Corporation, Partnership

10. Which of the following is the correct format of a sole proprietorships’ heading?

a. ABC Trading
Statement of Changes in Equity
As of December 31, 2019

b. Statement of Changes in Equity

ABC Trading
As of December 31, 2019

c. ABC Trading
Statement of Changes in Equity
For the year ended December 31, 2019

d. Statement of Changes in Equity

ABC Trading
For the year ended December 31, 2019

B. Sharpen your Mind. Identify what is being described in the following statements.
Choose your answer from the words listed below and write it on the answer sheet
provided.

Net Income Partnership Par Value

Withdrawals Stock Corporation
Share Capital Retained Earnings Sole proprietorship
Net Loss Dividends Equity

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1. A statement of changes in equity increases even without additional investment as

long as there is ________________.

2. A business organization with separate legal entity thereby making its owners not
personally liable of any debt.

3. When the statement decreases apart from the net effect of revenues and
expenses.

4. A company’s income earned after deducting its dividends and other distributable
elements to investors.

5. This is the amount written on the face of every certificate given to stockholders.
6. A business that has no separate existence from its owner.
7. The amount of resources received by a company as a result of investment and
donations.

8. A business organization which provide means of obtaining more equity capital than
a single individual can obtain and allow the sharing of risks.

9. This is the unit of corporate ownership which is generally represented by a

certificate.

10. An accounting event wherein expenses exceeds revenue.

C. Accounting Quest. Read and analyse the following accounting transactions. Place
your answers on the answer sheet given and provide solutions on how you arrive at your
answer.
 
I. ABM Company, owned and managed by Mr. Yee, was registered on 2018. During the
year, he invested P50,000 to the business. Also, ABM Company earned net income
for the year ended amounting to P20,250. And finally, Mr. Yee withdrew money from
the business for P5,600.
1. How much is the balance of Mr. Yee’s capital at the end of 2018?
2. Prepare a Statement of Equity for ABM Company.

II. In 2018, Ms. Wang put up Mike’s Trading. On January 1, 2018, Ms. Wang had a capital
balance of P25,500. During that year, she invested P75,800 worth of inventory to
Mike’s Trading. She also withdrew P10,200 which resulted to a capital balance at the
end of the year amounting to P106,360.
1. How much is the net income?
2. Prepare a Statement of Equity for Mike’s Trading.

III. Linda’s Marketing is owned and managed by Ms. Chui. As of January 1, 2019, Ms.
Chui had the capital balance of P155,000. During the year, she invested to the
business additional supplies amounting to P86,900. At the end of the year, Linda’s
Marketing earned net income amounting to P55,250 and had ending capital balance
of P191,950.
1. How much is Ms. Chui’s withdrawal for 2019?
2. Prepare a Statement of Equity for Linda’s Marketing.

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IV. Greece Restaurant is owned and managed by Mr. Cullen and registered on 2019. As
of January 1, 2019, Mr. Cullen had a capital balance of P88,000. He also earned net
income amounting to P57,850. During the year, Mr. Cullen withdrew P32,220 resulting
to an ending capital balance of P228,630.
1. How much is the additional investment of Mr. Cullen to the business?
2. Prepare a Statement of Equity for Greece Restaurant.

V. Gold’s Consulting Firm, owned and managed by Mr. Go, started operating in 2019.
During the year, Mr. Go invested additional equipment amounting to P175,600. Also,
the business earned P55,290 net income and made withdrawals amounting to
P87,250. Finally, his ending capital balance amounted to P246,140.
1. How much is the beginning capital of Mr. Go?
2. Prepare a Statement of Equity for Gold’s Consulting Firm.

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