Brief Introduction: Forms of Business Organization

BRIEF INTRODUCTION
The statement of changes in equity shows the movement of equity

account during the period. Whether it increases or decreases at the end of the
accounting period. In this module you have to recall what increases and
decreases owner’s equity account.
Increases owner ’s equity account are: Decreases owner ’s equity account are:
a. Additional investment a. Drawing
b. Profit b. Loss
Forms of Business and their owner’s as presented in the equity account
Forms of Business Owner/s
1. Single Proprietorship Proprietor
2. Partnership Partners
3. Corporation Shareholders
4. Cooperative Members
Forms of Business Organization
1. SINGLE/SOLE PROPRIETORSHIP –An entity whose assets, liabilities, income and

expenses are centered or owned by only one person.
2. PARTNERSHIP – An entity whose assets, liabilities, income and expenses are centered or
owned by two or more persons
3. CORPORATION – An entity whose assets, liabilities, income and expenses are centered or
owned by itself being a legally separate entity from its owners. Owners are called shareholders or
stockholders of the company.
Note: Differentiate the initial investment from the additional investments and define withdrawals
Initial Investment – The very first investment of the owner to the company.
Additional Investment – Increases to owner’s equity by adding investments by the owner.

Learning Module for Accountancy, Business and Management
Withdrawals –Decreases to owner’s equity by withdrawing assets by the owner.

*Distribution of Income – When a company is organized as a corporation, owners (called
shareholders) do not decrease equity by way of withdrawal. Instead, the corporation distributes
the income to the shareholders based on the shares that they have (percentage of ownership of
the company
The objective of this module is to prepare the statement of changes in

equity of a single proprietorship business.
Parts of Statement of Changes in Owner’s Equity
a. Heading
b. Increases to Equity
i. Net income for the year

ii. Additional investment
c.
Decreases to Equity
i. Net loss for the year
ii. Withdrawals by the owner
Format of SCE if the business has a net income

Format of SCE if the business resulted to a net loss
STEP MIN TUTORIAL SERVICES

STATEMENT OF CHANGES IN OWNER ’S EQUITY HEADING
For the year ended December 31, 2019
Capital, January 31, 2019 P 100,00 0 INCREASES

EQUITY
Additional Investment 50,000
Total P 150,000
Less: Drawing P25,000 DECREASES
Net Loss 25,000 50.000 EQUITY
Capital, December 31, 2019 P100,000
Shown above is an example of SCE with a negative result of

operation . The net loss is added to drawing account and the effect, it
decreases the owner ’s equity account.
ACTIVITIES
PREPARATION OF STATEMENT OF CHANGES IN EQUITY

The form of business organization determines the equity accounts reported on
financial statements. As we have reviewed above, the form of business organization differ
in the terms of number of owners and transferability of ownership. These inherent
characteristic of business organizations led to the difference in the presentation of
equity.
SOLE PROPRIETORSHIP
PARTNERSHIP
CORPORATION
Computation:
1. Capital stock January 1, 20xx
Number of Stocks Issued as of January 1, 20xx xxx
Par value X P xx
Capital Stocks January 1,20xx P xxx
2. Additional Paid in Capital, January1, 20xx

Number of Stocks Issued as of January 1, 20xx xxx
Issued Price in excess of par Value (P xx – xx) X P xx
Additional paid-in Capital. Jan.1,20xx P xxx
3. Capital Stock Issuance

Number of stock Issued on _______,20xx xxx
Par value X P xx
Capital Stock Issuance P xxx
4. Additional paid -in Capital, Issuance

Number of Stocks Issued on ______,20xx xxx
Issue price in excess of par value (xx – xx) X P xx
Additional paid -in Capital, Issuance P xxx
5. Dividends
Number of stocks Issued as of _______, 20xx xxx
Dividend per share X P xx
Dividends for ______, 20xx P xxx

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BRIEF INTRODUCTION

The statement of changes in equity shows the movement of equity

Forms of Business Owner/s

1. Single Proprietorship Proprietor

Forms of Business Organization

1. SINGLE/SOLE PROPRIETORSHIP –An entity whose assets, liabilities, income and

Additional Investment – Increases to owner’s equity by adding investments by the owner.

Withdrawals –Decreases to owner’s equity by withdrawing assets by the owner.

The objective of this module is to prepare the statement of changes in

Parts of Statement of Changes in Owner’s Equity

i. Net income for the year

Format of SCE if the business has a net income

Format of SCE if the business resulted to a net loss

STEP MIN TUTORIAL SERVICES

Capital, January 31, 2019 P 100,00 0 INCREASES

Shown above is an example of SCE with a negative result of

PREPARATION OF STATEMENT OF CHANGES IN EQUITY

2. Additional Paid in Capital, January1, 20xx

3. Capital Stock Issuance

4. Additional paid -in Capital, Issuance

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