Statement of Stockholder’s Equity

Statement of Stockholder’s Equity is a portion of the balance sheet which contains the amount of capital earned by the company in exchange to the stock.
The major elements of stockholders’ equity include capital stock, paid-in capital, retained earnings, treasury stock, unrealized loss on long-term investments, and foreign currency translation gains and losses.

Statement of Stockholder’s Equity is the record of the current equity stake held by the company’s investors. It is also a report of the unrealized gain or loss on long term investments, and also notes the alterations in the value of the foreign exchange. If the company had gained anything or had suffered a loss due to the foreign exchange transaction. It shows how much the investors of the company hold at stake. It also records the capital that is donated by the company and the retained earnings.

Methods of Calculating Statement of Stockholder’s Equity

The statement of stockholder’s equity is calculated by two methods. They are:
Firstly, it can be calculated by subtracting the company’s total liabilities from its total assets, i.e.,
Stockholder’s Equity = Total Assets – Company’s Total Liabilities
Secondly, the calculation can also be done by subtracting the treasury shares from the sum of share capital and retained earnings, i.e.,
Stockholder’s Equity = (Share Capital+ Retained Earnings) – Treasury Shares

Sources of Statement of Stockholder’s Equity

The main source of the Statement of Stockholder’s Equity is often taken to be the company’s book value. It is generated from two sources.
The primary source is the capital that was invested in the company during its inception and also if there was any additional investment done after the major one.
The secondary source is the retained earning the company has incurred over the years. The company accumulates its retained earnings through operations.
A company’s retained earnings matter a lot if the company has existed through a long time and have goodwill in the market. For such a company the retained earnings stock is the biggest one since it has accumulated the stock for a long period.

Special Items occurring in the Statement

Two special items occurring in the statement of stockholder’s equity are:
Appropriation of Retained Earnings: This is a part of the retained earnings that has been reserved for a special purpose.
Prior Period Adjustments: In this item, the rectification of a material error is done that has occurred in the previous accounting period involving an expense or revenue on any item.

 

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