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Financial Accounting · Statement of profit or loss and other comprehensive income

How to Prepare the Statement of Changes in Equity (SOCIE)

Updated 11 October 2026 · Fact-checked

The statement of changes in equity (SOCIE) reconciles opening equity to closing equity for each component: share capital, share premium, revaluation surplus and retained earnings. Start with opening balances, add total comprehensive income, add share issues, deduct dividends paid, and check each column to the statement of financial position.

Understand Statement of Changes in Equity

Equity is the owners' residual claim: assets minus liabilities. It changes during the year, and the statement of changes in equity (SOCIE) shows exactly why.

Equity is split into components, and each gets its own column: share capital, share premium, revaluation surplus and retained earnings. Some questions add a general reserve. Each column starts with the opening balance and ends with the closing balance that appears in the statement of financial position.

Four things move the columns. Profit for the year goes to retained earnings. Other comprehensive income (OCI), such as a revaluation gain on property, goes to its own reserve, normally the revaluation surplus. Share issues increase share capital, and any amount above nominal value goes to share premium. Dividends paid to shareholders reduce retained earnings.

A bonus issue gives shareholders free shares. No cash comes in. The shares are paid for by moving reserves into share capital, usually from share premium first or from retained earnings. Total equity does not change. A rights issue is different: shares are sold for cash, so equity rises.

Dividends are recorded when paid in the year (or, for equity shares, when properly declared and no longer at the company's discretion). A dividend proposed after the year end is not a liability at the year end and is not deducted in the SOCIE. It is only disclosed in the notes.

Key formulas to remember

Closing balance of each column
Closing = Opening + Total comprehensive income items + Share issues − Dividends ± Transfers
Apply it column by column, not just to total equity.
Total comprehensive income
Total comprehensive income = Profit for the year + Other comprehensive income
Profit goes to retained earnings. OCI goes to its own reserve, such as revaluation surplus.
Share issue at a premium
Cash received = Number of shares × issue price; share capital = shares × nominal value; share premium = shares × (issue price − nominal value)
The premium is never part of share capital.
Bonus issue
Bonus shares = existing shares × bonus ratio; debit reserves, credit share capital at nominal value
No cash. Total equity is unchanged.
Closing equity check
Closing equity = Net assets in the statement of financial position
Total closing equity must agree to total assets minus total liabilities.

How to solve Statement of Changes in Equity questions

Use this method for any SOCIE question, whether it is a full statement or one missing figure.

  1. 1Draw columns: share capital, share premium, revaluation surplus, retained earnings and total. Add any other reserve named in the question.
  2. 2Enter the opening balance in each column and total them across.
  3. 3Put the profit for the year in the retained earnings column. Put any OCI, such as a revaluation gain, in the revaluation surplus column.
  4. 4Enter share issues. Nominal value goes to share capital and the excess over nominal goes to share premium.
  5. 5For a bonus issue, add nominal value to share capital and deduct the same amount from share premium or retained earnings, as instructed. The total is unchanged.
  6. 6Deduct dividends paid in the year from retained earnings. Ignore dividends proposed after the year end.
  7. 7Total each column to get closing balances, then total across. Agree each balance to the statement of financial position.

Quickest way: Column-by-column roll-forward

When to use it: Use this for number-entry or multiple-choice questions that ask for one closing balance or total equity.

  1. Identify which column the question asks about.
  2. Write opening balance, then only the items that touch that column.
  3. For retained earnings: opening + profit − dividends paid. For share premium: opening + premium on new shares − any bonus issue taken from it.
  4. For total equity: opening + total comprehensive income + cash from share issues − dividends. Ignore bonus issues because they net to zero.

Common mistakes in Statement of Changes in Equity

  • Putting a revaluation gain into retained earnings.

    Students treat every gain as profit.

    Fix: A revaluation gain on a non-current asset is OCI. Credit it to the revaluation surplus column.

  • Deducting a proposed final dividend after the year end.

    The dividend appears in the question, so it feels like it must be used.

    Fix: Deduct only dividends paid or declared in the year. A later proposal is a note disclosure only.

  • Adding the full issue price to share capital.

    Students forget share capital is held at nominal value.

    Fix: Split the proceeds: nominal value to share capital, the rest to share premium.

  • Treating a bonus issue as bringing in cash or changing total equity.

    It is confused with a rights issue.

    Fix: A bonus issue only moves amounts between columns. Total equity stays the same.

  • Adding profit to total equity but not to retained earnings.

    Students fill the total column first and forget to complete the component columns.

    Fix: Fill each component column first, then add across. Check the cross-total matches.

Worked examples

Example 1

At 1 January, a company had share capital of $500,000 ($1 shares), share premium of $80,000, revaluation surplus of $40,000 and retained earnings of $220,000. During the year it made a profit of $90,000, had a property revaluation gain of $25,000, issued 100,000 new $1 shares at $1.50 each for cash, and paid a dividend of $30,000. Prepare the closing balances and total equity.

Show the solution
  1. Opening total equity: 500,000 + 80,000 + 40,000 + 220,000 = $840,000.
  2. Share capital: 500,000 + 100,000 = $600,000.
  3. Share premium: 100,000 × $0.50 = $50,000. Closing 80,000 + 50,000 = $130,000.
  4. Revaluation surplus: 40,000 + 25,000 = $65,000.
  5. Retained earnings: 220,000 + 90,000 − 30,000 = $280,000.
  6. Total equity: 600,000 + 130,000 + 65,000 + 280,000 = $1,075,000.
  7. Check: 840,000 + total comprehensive income 115,000 + cash from shares 150,000 − dividend 30,000 = $1,075,000.

Answer: Share capital $600,000; share premium $130,000; revaluation surplus $65,000; retained earnings $280,000; total equity $1,075,000.

Example 2

A company has share capital of $200,000 ($1 shares), share premium of $60,000 and retained earnings of $140,000. It makes a 1 for 4 bonus issue using share premium, then makes a profit of $50,000 for the year and pays a dividend of $20,000. Find the closing balance of each component and total equity.

Show the solution
  1. Opening total equity: 200,000 + 60,000 + 140,000 = $400,000.
  2. Bonus shares: 200,000 ÷ 4 = 50,000 shares at $1 = $50,000.
  3. Share capital: 200,000 + 50,000 = $250,000.
  4. Share premium: 60,000 − 50,000 = $10,000.
  5. Retained earnings: 140,000 + 50,000 − 20,000 = $170,000.
  6. Total equity: 250,000 + 10,000 + 170,000 = $430,000.
  7. Check: 400,000 + 50,000 profit − 20,000 dividend = $430,000. The bonus issue had no effect on the total.

Answer: Share capital $250,000; share premium $10,000; retained earnings $170,000; total equity $430,000.

Exam tips

  • Read for the dividend wording. Paid or declared in the year is deducted. Proposed after the year end is not.
  • In an objective test, identify the single column asked for and ignore the rest.
  • Always do a total equity check: opening equity + total comprehensive income + cash share issues − dividends.
  • If a question gives a bonus issue and a rights issue, treat them separately. Only the rights issue brings in cash.
  • Use the SOCIE closing balances to check your statement of financial position equity section.

Practice questions from Statement of profit or loss and other comprehensive income

Statement of Changes in Equity in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Statement of Changes in Equity: frequently asked questions

What is the format of the statement of changes in equity?

It is a table with a column for each equity component and a total column. Rows show the opening balance, total comprehensive income, share issues, dividends and the closing balance.

Where do dividends go in the SOCIE?

Dividends paid to equity shareholders are deducted from retained earnings in the year they are paid or properly declared. They are not an expense in profit or loss.

Where does a revaluation surplus appear in the SOCIE?

The gain is shown as other comprehensive income. It is added to the revaluation surplus column, not retained earnings, and is included in total comprehensive income.

How do share premium and a bonus issue appear in the SOCIE?

A new issue above nominal value adds the excess to share premium. A bonus issue adds nominal value to share capital and deducts the same amount from share premium or retained earnings, so total equity does not change.