As its name implies, the statement of changes in stockholders' equity includes only items that impact a corporation's equity. The following practice questions will bring you up to speed on what this statement includes and leaves out.
Practice questions
Which of the following is not included on the statement of changes in stockholders' equity?
A. Capital invested by the owners
B. Capital returned to the owners
C. Dividends
D. Total assets
E. Annual profit
Which of the following would not be found on the statement of changes in stockholders' equity?
A. Net loss
B. Proceeds from the sale of bonds
D. Sale of common stock
C. Payment of cash dividends
E. Distribution of stock dividends
Answers and explanations
The correct answer choice is D.
Total assets are reported on the balance sheet and not on the statement of changes in stockholders' equity. The statement of changes in stockholders' equity includes only items that impact equity, such as investments by owners, capital returned to owners, dividends, and earnings.
The correct answer choice is B.
A net loss is treated similar to net income on the statement of changes in stockholders' equity, except it's a deduction from retained earnings. The sale of common stock and all dividend payments are also reflected in the statement of changes in stockholders' equity because they involve changes in equity accounts. The proceeds from the sale of bonds, though, don't involve a change in any equity accounts and therefore aren't included in the statement of changes in stockholders' equity.
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