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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

Which of the following items would normally appear as a separate line in a company's Statement of Changes in Equity?

Dividends approved and paid to equity shareholders appear in the Statement of Changes in Equity because they are distributions to owners that reduce equity. Depreciation, bad debts and interest are expenses within profit, and inventory changes belong to working capital, so none appear separately.

  1. ADividends declared and approved to equity shareholders during the yearCorrect
  2. BDepreciation charged on plant and machinery
  3. CTrade receivables written off as bad debts
  4. DInterest paid on bank borrowings
  5. Increase in inventories during the year

Explanation

The Statement of Changes in Equity reconciles opening and closing equity, showing profit for the period, other comprehensive income, share issues and distributions to owners such as dividends. Depreciation, bad debts and interest are expenses inside profit, and inventory movement is a working capital item shown in cash flow analysis.

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