Statement of Owner Equity

1
Statement of Owner Equity

• Gerry Schwab and Sherrill Nott

2
Statement of Owner Equity

• Purpose
• To reconcile the owner equity amount stated at
  the beginning of the time period, with the owner
  equity amount determined at the end of the time
  period.

3
OWNER Equity

• Term used to describe value of the business after
  the total claims of creditors are subtracted from
  the value of the assets.
• The term owner equity refers only to a business
  and this statement includes no information for an
  individual person.

4
Net Worth

• The term net worth is used to describe value of
  business plus personal valuation after the total
  claims of creditors are subtracted from the value
  of assets.
• The term net worth refers to a statement for an
  individual person or a statement for a business
  which also contains data for an individual person.

5
Statement of Owner Equity

• Components should include
• 1. Beginning owner equity
• 2. Plus net income amount
• 3. Minus owner withdrawals
• 4. Plus contributions received by business
• 5. Minus contributions distributed to others
• 6. Equals Change in Retained Earnings/Contributed
  Capital
• 7. Ending Owner Equity (Cost Value Basis)

6
Statement of Owner Equity

• Components should include
• 7. Ending Owner Equity (Cost Value Basis)
• 8. Adjustment for change in Asset Values (Ending
  market value - cost value) -
• (Beginning market value - cost value)
• from beginning to end of time period
• and adjustment for change in Deferred Debt
• (Beginning - Ending Deferred Liabilities)
• 9. Equals change in market valuation equity
• 10. Ending Owner Equity (Market Value Basis)

7
Statement of Owner Equity
8
Statement of Owner Equity8. Change in Excess of
Market Value over Cost Basis of Marketable
Securities and Farm Capital Assets
9
Statement of Owner Equity (net worth) Cash Grain
Farm -- Jan. to Dec. 2000
10
Statement of Owner Equity8. Change in Excess of
Market Value over Cost Basis of Marketable
Securities and Farm Capital Assets
11
Statement of Owner Equity -- Summary

• Can determine CHANGE in Owner Equity from
  beginning to end of time period
• Components of change are
• Retained earnings from profit
• Contributed capital from sources outside the
  business
• Inflation/Deflation -- Change in Market Values