Which statement describes the purpose of the Statement of Shareholders' Equity?

Which statement describes the purpose of the Statement of Shareholders' Equity?

• A. It discloses the sources of changes in permanent shareholders' equity accounts
• B. It reports the company’s taxes payable
• C. It shows the company’s debt maturities
• D. It lists the company's assets

Answer: (A)

The statement of shareholders’ equity traces how the owners’ stake in the company changes over a period. It shows the opening balances of equity and the sources of changes—such as shares issued, shares repurchased, net income added to retained earnings, dividends paid, and items in other comprehensive income—so you can see what caused equity to increase or decrease. This ties together what happened in the income statement (net income) and in financing activities (stock issuances and buybacks) with the ending equity balances shown on the balance sheet. It’s not about taxes payable, debt maturities, or assets, which appear on other statements; those items are not part of the changes in equity. This makes it the best description of the purpose.

The statement of shareholders’ equity traces how the owners’ stake in the company changes over a period. It shows the opening balances of equity and the sources of changes—such as shares issued, shares repurchased, net income added to retained earnings, dividends paid, and items in other comprehensive income—so you can see what caused equity to increase or decrease. This ties together what happened in the income statement (net income) and in financing activities (stock issuances and buybacks) with the ending equity balances shown on the balance sheet. It’s not about taxes payable, debt maturities, or assets, which appear on other statements; those items are not part of the changes in equity. This makes it the best description of the purpose.