Corporate Accounting and Auditing · Presentation of Financial Statements (Ind AS 1)

Statement of Changes in Equity and Notes under Ind AS 1

Updated 10 October 2026 · Fact-checked

The statement of changes in equity (SOCIE) shows how each component of equity moved from the opening to the closing balance of the period. Start with the opening balance, adjust for errors and policy changes, add profit, OCI, issues and dividends, and arrive at the closing balance. Notes then explain policies and key disclosures.

Understand Statement of Changes in Equity and Notes to Accounts

A balance sheet shows equity at one date. It does not show why equity changed. The statement of changes in equity fills that gap. It is one of the components of a complete set of financial statements under Ind AS 1.

The statement reconciles each component of equity at the start of the period with the end of the period. Components include equity share capital, other equity items such as securities premium, retained earnings, general reserve, and other comprehensive income (OCI) reserves. Schedule III (Division II) presents it in two parts: (a) equity share capital and (b) other equity.

What goes in it: total comprehensive income for the period (profit or loss plus OCI), the effects of retrospective application or restatement under Ind AS 8 for each component, and transactions with owners acting as owners. Examples of the last are share issues, buy-backs, dividends, bonus issues and transfers to reserves. Ind AS 1 requires the effect of retrospective application or restatement to be shown separately from the other movements.

The notes are the fourth pillar. They give the basis of preparation, the significant accounting policies (the measurement basis used and other policies relevant to understanding the statements), information required by Ind AS that is not shown on the face of the statements, and other information that is relevant. Notes should be presented systematically, and each item on the face of the statements should be cross-referenced to its note.

The notes must also cover key judgements management made in applying policies that most affect the amounts, and sources of estimation uncertainty that carry a significant risk of material adjustment in the next year. Ind AS 1 also requires capital disclosures: the entity's objectives, policies and processes for managing capital, summary quantitative data about what it manages as capital, and whether it complied with any externally imposed capital requirements.

Key rules to remember

Closing balance of each equity component: Opening balance ± Restatement/policy-change effect + Profit/(loss) + OCI + Issues of shares − Dividends − Buy-back ± Transfers = Closing balance; Work column by column or row by row. Each component must tie to the balance sheet.
Total comprehensive income: Total comprehensive income = Profit or loss for the period + Other comprehensive income; Both amounts are shown in the statement; OCI items go to their own reserve or to retained earnings as the relevant Ind AS requires.
Retained earnings roll-forward: Closing retained earnings = Opening + Profit for the year − Dividends − Transfers to reserves (± remeasurement items taken directly); Transfers between components of equity do not change total equity.
Order of notes: Statement of compliance → Basis of preparation → Significant accounting policies → Supporting information → Other disclosures; Ind AS 1 requires notes to be presented in a systematic manner and cross-referenced.

How to solve Statement of Changes in Equity and Notes to Accounts questions

Use this sequence for any question that asks you to prepare the statement of changes in equity or list note disclosures.

1List the equity components from the balance sheet: equity share capital, securities premium, general reserve, retained earnings, OCI reserves.
2Write the opening balance of each component. If a prior-period error or policy change is given, show the restated opening balance separately.
3Take profit or loss to retained earnings and OCI items to their own reserve or as the Ind AS requires.
4Enter owner transactions: share issues with premium, bonus issues (use the reserve that is capitalised), dividends paid, buy-back and related transfers.
5Show transfers between components, such as to general reserve. They must net to zero across total equity.
6Total each column and check it agrees with closing balance sheet figures.
7For note questions, state the compliance statement, basis of preparation, policies, judgements and estimation uncertainty, and capital management disclosures, each with a brief explanation.

Quickest way: Column roll-forward with a tie-out check

When to use it: Use this for numerical SOCIE questions when time is short.

Draw columns for share capital, securities premium, general reserve, retained earnings and total.
Fill opening balances. Fill all given movements in one pass.
Check that total equity movement equals profit + OCI + net owner transactions.
Tie the closing figures to the balance sheet, if given, before you finish.

Common mistakes in Statement of Changes in Equity and Notes to Accounts

Putting dividends in the statement of profit and loss.
Students treat dividends like an expense.
Fix: Dividends to owners are distributions. Show them in the statement of changes in equity, not in profit or loss.
Showing a bonus issue as increasing total equity.
Share capital goes up, so students add it without reducing the reserve.
Fix: Bonus shares move amounts within equity. Increase share capital and reduce the reserve used by the same amount.
Leaving out OCI from the statement.
Students focus on profit only.
Fix: Include total comprehensive income. Show OCI items separately from profit.
Mixing restatement effects into current-year profit.
Prior-period errors and policy changes seem like current movements.
Fix: Show the Ind AS 8 retrospective effect on opening balances separately, before current-year movements.
Writing notes as a list of headings with no content.
Students memorise titles only.
Fix: For each disclosure, add one line of what is disclosed, such as the measurement basis in the policy note or the capital objectives in the capital note.

Worked examples

Example 1

Sundaram Ltd has the following balances on 1 April 2026: equity share capital ₹50,00,000; securities premium ₹5,00,000; general reserve ₹8,00,000; retained earnings ₹12,00,000. During 2026-27: profit for the year ₹9,00,000; OCI gain of ₹1,00,000 from remeasurement of a defined benefit plan (taken directly to retained earnings); fresh issue of ₹5,00,000 equity shares at a premium of ₹1,00,000 in total; dividend paid ₹4,00,000; transfer ₹2,00,000 to general reserve. Prepare the closing balance of each component.

Show the solution

Equity share capital: 50,00,000 + 5,00,000 = ₹55,00,000.
Securities premium: 5,00,000 + 1,00,000 = ₹6,00,000.
General reserve: 8,00,000 + 2,00,000 transfer = ₹10,00,000.
Retained earnings: 12,00,000 + 9,00,000 profit + 1,00,000 remeasurement gain (a defined benefit plan remeasurement is transferred to retained earnings) − 4,00,000 dividend − 2,00,000 transfer = ₹16,00,000.
Total equity: 55,00,000 + 6,00,000 + 10,00,000 + 16,00,000 = ₹87,00,000.
Check: opening total 75,00,000 + total comprehensive income 10,00,000 (profit 9,00,000 + OCI 1,00,000) + issue 6,00,000 (capital 5,00,000 + premium 1,00,000) − dividend 4,00,000 = ₹87,00,000. The transfer of 2,00,000 to general reserve nets to zero within total equity, so it does not appear in this check. It agrees.

Answer: Share capital ₹55,00,000; securities premium ₹6,00,000; general reserve ₹10,00,000; retained earnings ₹16,00,000; total equity ₹87,00,000.

Example 2

Briefly state what the notes to financial statements of Kaveri Ltd must disclose about capital under Ind AS 1, and give the other main parts of the notes.

Show the solution

Capital disclosures: the entity's objectives, policies and processes for managing capital.
Summary quantitative data about what it manages as capital.
Any changes in the above from the previous period.
Whether it complied with externally imposed capital requirements and, if not, the consequences of non-compliance.
Other main parts: statement of compliance with Ind AS, basis of preparation and measurement basis, significant accounting policies, key judgements, sources of estimation uncertainty, and information required by other Ind AS but not shown on the face of the statements.

Answer: Capital disclosure covers objectives, policies and processes, quantitative data, changes and compliance with external requirements. The notes also give the compliance statement, basis of preparation, significant accounting policies, judgements and estimation uncertainty.

Exam tips

In MCQs, remember that SOCIE is a primary statement, not a note, and that dividends and bonus issues belong in it rather than in profit or loss.
In numerical questions, show every column and a total row. Step marks go to correct components even if the total is wrong.
For theory, write each disclosure with one explanatory line. A list of headings alone earns few marks.
Always tie closing equity to the balance sheet figure as a final check.
Keep restatement effects under Ind AS 8 separate from current-year movements.

Practice questions from Presentation of Financial Statements (Ind AS 1)

Statement of Changes in Equity and Notes to Accounts 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 and Notes to Accounts: frequently asked questions

Is the statement of changes in equity compulsory under Ind AS 1?

Yes. It is one of the components of a complete set of financial statements. It shows the movement in each component of equity during the period.

What goes in the statement of changes in equity?

Total comprehensive income for the period, the effects of retrospective application or restatement, and transactions with owners such as share issues, dividends and buy-backs. Transfers between reserves also appear.

What must the significant accounting policies note contain?

It must state the measurement basis used in preparing the statements and other accounting policies relevant to understanding them. Management should also disclose judgements made in applying the policies that most affect the amounts recognised.

What capital disclosures does Ind AS 1 require?

The entity discloses its objectives, policies and processes for managing capital, summary quantitative data on what it treats as capital, any changes, and compliance with externally imposed capital requirements.