Limited company accounts

Statement of Changes in Equity

Purpose

The statement of changes in equity (SOCE) reconciles opening and closing equity balances, showing every movement during the year. It links the income statement (profit after tax) to the equity section of the SFP.

Format

                    Share    Share    Revaluation  Retained    Total
                    Capital  Premium  Reserve      Earnings    Equity
                      £        £          £            £          £
Opening balance       X        X          X            X          X
Share issue (rights)  X        X          –            –          X
Revaluation           –        –          X            –          X
Profit for the year   –        –          –            X          X
Dividends paid        –        –          –           (X)        (X)
─────────────────────────────────────────────────────────────────────
Closing balance       X        X          X            X          X

Key rules

• Opening balances = closing balances from the prior year SFP
• Rights issue: increases share capital and share premium; total equity increases
• Bonus issue: increases share capital; decreases reserves by the same amount; total equity unchanged
• Revaluation: increases revaluation reserve only; no effect on retained earnings
• Profit for the year: taken from the bottom of the income statement; increases retained earnings
• Dividends paid: interim dividends paid during the year reduce retained earnings (and total equity)
• Closing balances must exactly match the equity section of the SFP