Investors use the information found on a company’s financial statements to determine its financial health. These financial statements consist of the balance sheet, the income statement, the statement of cash flows and the statement of stockholders’ equity. The latter provides equity account balances and information regarding the activity in the stockholder’s equity for the period being reported.
Set up the statement of stockholders’ equity template. The heading consists of the company name, the financial statement title and the period being reported. The first column on the left has no title. Label each of the next columns with the titles of each equity account from the general ledger. Label the far-right column Total Stockholders’ Equity.
List the beginning balances. In the far-left column, label the next row as Beginning Balance, including the first date of the period. List the beginning balance of each account in the appropriate account. Add the balances and include the total in the far-right column.
Identify equity transactions throughout the year. These transactions consist primarily of issuing stock, repurchasing stock, paying dividends or recording net income. Review each equity account for changes. Every change represents an equity transaction.
Record each transaction amount on the financial statement. Adjust the specific equity account columns for the dollar changes of each transaction. Summarize similar transactions, such as multiple cash dividend payments or several stock issues. Total each transaction amount in the far-right column.
Calculate the ending balances. Label the next row down the Ending Balance, including the last date of the period. Add the sum of each column to determine the ending balance. Compare these balances to the general ledger account balances. These amounts must equal. If the balances differ, review the transactions in each account that differs. Revise the statement for any transactions that were not listed properly on the statement of stockholders’ equity.
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