What does the statement of changes in equity report?

• A. It shows the company's cash inflows and outflows
• B. It lists all asset and liability changes
• C. It shows changes in owner's equity over the period, including investments, withdrawals, and net income or loss
• D. It summarizes the company’s revenue and expenses

Answer: (C)

The statement of changes in equity shows how owners’ equity changes over the period. It records capital contributions by owners, withdrawals or distributions, and the net income or loss for the period, all of which increase or decrease equity. In addition, it can reflect other changes in equity such as adjustments to retained earnings or additional paid-in capital, depending on the entity type. This keeps track from the opening equity balance to the ending balance, tying together how profits, losses, and owner transactions affect the owners’ claim on the business. It isn’t about cash flows (that’s the cash flow statement), nor about listing all assets and liabilities (that’s the balance sheet), nor about summarizing revenues and expenses (that’s the income statement).