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Financial Statements of Sole Proprietorship, Page 4

Statement of Owner’s Equity

A Statement of Owner’s Equity is a summary of the changes in the owner’s equity that have occurred as a result of the business transactions of a specified period. It forms the link between the income statement and the balance sheet.

The Owner’s Equity is prepared: 

  • After the income statement is prepared because the net income or net loss for the period must be reported in this statement.
  • Before the balance sheet is prepared because the amount of owner’s equity at the end of the period must be reported on the balance sheet.
  • At the end of the accounting period.

Statement of Owner's Equity

 

The Owner’s Equity is: 

  • Increased by amounts invested by the owner and is decreased by withdrawals by the owner. 
  • Increased by revenues and decreased by expenses.