Financial Reporting · Preparation of single entity financial statements

How to Prepare the Statement of Changes in Equity

Updated 11 October 2026 · Fact-checked

The statement of changes in equity (SOCIE) reconciles each component of equity from the opening to the closing balance. Use one column per component. Add total comprehensive income, share issues and bonus issues, and deduct dividends recognised in the period. Each column must roll forward to the figure in the statement of financial position.

Understand Statement of Changes in Equity

Equity is the owners' stake in the company. It is made up of share capital, share premium, revaluation surplus and retained earnings. Each of these balances changes during the year. The statement of changes in equity (SOCIE) shows why.

Think of it as a bridge. The opening balance of each component is on the left. The closing balance, which must match the statement of financial position, is at the bottom. Everything in between is a movement.

There are four kinds of movement you must know. First, total comprehensive income for the year: profit goes to retained earnings, and other comprehensive income (such as a revaluation gain) goes to its own reserve. Second, share issues: these raise share capital and, if issued above nominal value, share premium. Third, dividends recognised in the year, which reduce retained earnings. Fourth, transfers between reserves, such as a bonus issue.

Dividends are not an expense. They never appear in profit or loss. They appear only in the SOCIE. A dividend is recognised when it is declared or authorised, so that it is no longer at the company's discretion (IAS 10 and IAS 32). The SOCIE deducts dividends recognised in the period, whether or not they have been paid yet. This includes a final dividend for the previous year that was approved and paid in the current year. A dividend proposed after the year end is not recognised; it is only disclosed in the notes (IAS 10).

In the exam you are usually given the trial balance and some adjustments. You prepare the statement of profit or loss and OCI first. The SOCIE then picks up the totals from it.

Key rules to remember

Closing equity component: Closing balance = Opening balance + movements in the year; Apply this separately to each column. The closing totals must agree to the statement of financial position.
Retained earnings roll-forward: Closing retained earnings = Opening + profit for the year − dividends recognised ± transfers; Profit for the year is after tax. Adjust the opening balance for any prior period error or change in accounting policy (IAS 8), whether it increases or decreases retained earnings. Dividends recognised are those declared or authorised in the year, whether or not paid.
Revaluation gain (OCI): Revaluation gain (OCI) = Revalued amount − carrying amount before revaluation; A gain goes to OCI and the revaluation surplus. Closing revaluation surplus = opening surplus + gain − any transfer to retained earnings. If the asset was previously impaired through profit or loss, the gain first reverses that loss in profit or loss.
Share issue at a premium: Share capital = shares × nominal value; Share premium = shares × (issue price − nominal value); Deduct issue costs from share premium, not from profit or loss.
Bonus issue: Bonus shares × nominal value is debited to a reserve (share premium, revaluation surplus or retained earnings) as specified in the question, and credited to share capital; No cash is received. Total equity does not change. Use the reserve the question specifies; if none is stated, state your assumption.
Total comprehensive income: Total comprehensive income = Profit for the year + Other comprehensive income; Show profit in the retained earnings column and OCI in the revaluation surplus column.
Revaluation surplus transfer: Excess depreciation transfer = Depreciation on revalued amount − Depreciation on historical cost; Optional under IAS 16. It moves an amount from revaluation surplus to retained earnings each year. Do it only if the question says so.

How to solve Statement of Changes in Equity questions

Use this method for any SOCIE question. It keeps the figures organised and checks your work against the statement of financial position.

1Set up the columns: share capital, share premium, revaluation surplus, retained earnings and total. Add other reserves only if the question has them.
2Enter the opening balance in each column. Take them from the prior year statement of financial position or the trial balance, adjusting for any restatement.
3Prepare the profit or loss and OCI first. Pick up the profit for the year and OCI, such as the revaluation gain.
4Enter profit in retained earnings and OCI in the revaluation surplus column. Then show total comprehensive income as a subtotal if useful.
5Enter share issues, bonus issues and rights issues. Split between capital and premium, and adjust for issue costs. For a bonus issue, use the reserves the question specifies; if none is stated, state your assumption.
6Deduct dividends recognised in the year (declared or authorised) from retained earnings, whether or not they have been paid. This includes a prior year final dividend approved in the year. Ignore dividends proposed after the year end; they are only disclosed.
7Total each column and the total column. Cross-check to the equity figures in the statement of financial position. If they differ, find the missing movement.

Quickest way: Column-and-tick approach

When to use it: Use this when time is short, particularly in a Section C question where the SOCIE is only part of the answer.

Draw the five columns and write the opening balances first. This earns easy marks.
Take the profit and the revaluation gain straight from your profit or loss and OCI workings.
Scan the question for the words issued, bonus, paid and dividend. Each one is a line in the SOCIE.
Compute each closing balance, then check it against the statement of financial position figure you have already calculated.
If one column is out, look at dividends and share issues first. These cause most errors.

Common mistakes in Statement of Changes in Equity

Putting dividends through profit or loss
Students treat dividends as a cost of the year, like interest.
Fix: Dividends are a distribution of profit. Show them only as a deduction from retained earnings in the SOCIE.
Deducting a proposed final dividend
The question mentions a dividend and the student deducts it without checking when it was declared.
Fix: Deduct only dividends recognised in the period, meaning declared or authorised, whether or not paid. A dividend proposed after the year end is a note disclosure under IAS 10.
Taking a revaluation gain to profit or loss
Students link all gains to income.
Fix: A revaluation gain goes to OCI and the revaluation surplus, unless it reverses an earlier loss on the same asset that was charged to profit or loss.
Recording the full issue price as share capital
The nominal value and the issue price are mixed up.
Fix: Share capital gets only nominal value. The excess over nominal goes to share premium. Issue costs reduce share premium.
Showing profit before tax in the SOCIE
The figure is copied from the wrong line of the income statement.
Fix: Use profit for the year after tax. This is the line that feeds total comprehensive income.
Changing total equity for a bonus issue
Students treat the bonus issue like a cash issue.
Fix: A bonus issue only moves amounts between columns. Add to share capital and take the same amount from reserves. The total column is unchanged.

Worked examples

Example 1

At 1 April 20X4 Delta Co had share capital of ₹10,00,000 (₹1 shares), share premium ₹2,00,000, revaluation surplus ₹1,50,000 and retained earnings ₹6,00,000. In the year to 31 March 20X5 profit for the year was ₹3,20,000. Land was revalued upwards, giving a gain of ₹80,000. Delta issued 2,00,000 ₹1 shares at ₹1.50 each, and paid a dividend of ₹1,00,000. Prepare the SOCIE.

Show the solution

Share capital: opening ₹10,00,000 + issue 2,00,000 × ₹1 = ₹2,00,000. Closing ₹12,00,000.
Share premium: the issue is at ₹0.50 premium per share, so 2,00,000 × ₹0.50 = ₹1,00,000. Closing ₹2,00,000 + ₹1,00,000 = ₹3,00,000.
Revaluation surplus: opening ₹1,50,000 + OCI gain ₹80,000 = ₹2,30,000.
Retained earnings: opening ₹6,00,000 + profit ₹3,20,000 − dividend ₹1,00,000 = ₹8,20,000.
Total equity: opening ₹19,50,000. Movements: total comprehensive income ₹4,00,000 (₹3,20,000 + ₹80,000), share issue ₹3,00,000, dividend −₹1,00,000. Closing ₹25,50,000.
Check by adding the columns: ₹12,00,000 + ₹3,00,000 + ₹2,30,000 + ₹8,20,000 = ₹25,50,000.

Answer: Closing balances: share capital ₹12,00,000; share premium ₹3,00,000; revaluation surplus ₹2,30,000; retained earnings ₹8,20,000; total equity ₹25,50,000.

Example 2

Omega Co has at 1 January 20X6: share capital ₹5,00,000 (₹1 shares), share premium ₹1,00,000, retained earnings ₹4,00,000. During 20X6 it made a 1 for 5 bonus issue, using share premium. Profit for the year was ₹2,50,000. It paid dividends of ₹60,000. Prepare the closing balances for the SOCIE.

Show the solution

Bonus shares: 5,00,000 ÷ 5 = 1,00,000 shares at ₹1 nominal = ₹1,00,000.
Share capital: ₹5,00,000 + ₹1,00,000 = ₹6,00,000.
Share premium: ₹1,00,000 − ₹1,00,000 = nil.
Retained earnings: ₹4,00,000 + ₹2,50,000 − ₹60,000 = ₹5,90,000.
Total equity: opening ₹10,00,000. Profit +₹2,50,000, dividend −₹60,000, bonus issue nil effect. Closing ₹11,90,000.
Check: ₹6,00,000 + nil + ₹5,90,000 = ₹11,90,000.

Answer: Closing balances: share capital ₹6,00,000; share premium nil; retained earnings ₹5,90,000; total equity ₹11,90,000.

Exam tips

In an objective test question, find the missing figure by rolling forward one column: opening + profit − dividends recognised = closing retained earnings. Do not build the full statement.
Read dates carefully. A dividend declared or authorised in the year reduces equity, even if it is unpaid at the year end. A dividend proposed after the year end does not.
Show total comprehensive income clearly if the question asks for it. It is profit plus OCI, and examiners reward the sub-total.
If the SOCIE does not agree to the statement of financial position, check issue costs and the revaluation first. These are the usual causes.
Label each line clearly, such as Issue of share capital, Dividends, Total comprehensive income. Marks are given for correct narrative as well as figures.

Practice questions from Preparation of single entity financial statements

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 columns does a SOCIE need in ACCA FR?

Use share capital, share premium, revaluation surplus, retained earnings and a total column. Add other reserves only when the question gives them. Each column must roll forward from opening to closing balance.

Where does a revaluation surplus go in the SOCIE?

The gain is other comprehensive income. It is shown in the revaluation surplus column as part of total comprehensive income. It does not go to retained earnings unless you are making an excess depreciation transfer.

Are dividends deducted in the SOCIE or in profit or loss?

Dividends are deducted only in the SOCIE, from retained earnings. They are never an expense in profit or loss. The SOCIE deducts dividends recognised (declared or authorised) in the period, whether or not paid. Dividends proposed after the year end are only disclosed.

Does a share issue change retained earnings?

No. A share issue increases share capital and, if above nominal value, share premium. Issue costs are deducted from share premium. Retained earnings are unaffected.