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ACCA Applied Knowledge · Business and Technology · Financial information provided by business

Which of the following best describes the main purpose of the statement of changes in equity?

The statement of changes in equity reconciles the opening and closing balance of each component of equity. It shows total comprehensive income, dividends paid and share issues during the period, rather than cash flows or a list of assets and liabilities.

  1. ATo show the cash received and paid by the entity during the period
  2. BTo reconcile the opening and closing balances of each component of equity, including profit, other comprehensive income, dividends and share issuesCorrect
  3. CTo list the entity's assets and liabilities at the year end
  4. DTo analyse revenue and expenses by function

Explanation

The statement of changes in equity shows how each component of equity, such as share capital, retained earnings and revaluation surplus, moved between the start and end of the period. It includes total comprehensive income, dividends and share issues. Cash movements belong in the cash flow statement.

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