Financial statement that explains how equity balances changed during the reporting period.
The statement of changes in equity is the financial statement that explains how equity balances moved during the reporting period. It typically shows the effects of net income, losses, dividends, owner contributions, share transactions, and other comprehensive income where relevant.
This statement helps readers understand why ending equity differs from beginning equity. It connects profitability, distributions, and capital activity in a way that the balance sheet alone cannot.
The statement usually begins with opening balances, then shows period movements by equity component before arriving at ending balances. Retained earnings is often a major focus because it captures the accumulation of profit less dividends and other adjustments.
If opening equity is 500,000, the company earns 60,000, pays 15,000 of dividends, and issues 40,000 of new shares, the statement of changes in equity explains how those items lead to ending equity of 585,000.
This statement is not the same as the balance sheet. The balance sheet shows ending equity at a date. The statement of changes in equity explains how that ending balance was reached over the period.