Question

The statement of changes in stockholders' equity _____. describes changes in each of the major equity subcategories is part of the statement of retained earnings shows only the ending balances in stockholders' equity does not include changes in treasury stock

Answer 1

Answer:

describes changes in each of the major equity subcategories.

Explanation:

Stockholders' equity can be defined as the amount of assets remaining or the residual interest of assets in a business after all liabilities are settled or deducted. A stockholders' equity is calculated by deducting or subtracting the value of liabilities from the value of assets on the balance sheet of a company.

Mathematically, it is denoted as;

$Stockholders' equity = Total assets - Total liabilities$

Or

$Stockholders' equity = ({Share capital + Retained earnings} - Treasury stock)$

It is important to note that, a negative stockholders' equity is a strong indicator of an impending bankruptcy.

Basically, stockholders' equity are typically generated from two (2) main sources; capital invested by shareholders and retained earnings.

The statement of changes in stockholders' equity describes changes in each of the major equity subcategories and typically, does a reconciliation of the opening balances of equity accounts with their closing balances.

Additionally, statement of changes in stockholders' equity is a financial statement that illustrate a summary of the changes in shareholders' equity (gains and losses that increase or decrease stockholders' equity respectively) over the reporting period.

They are usually not reported on the income statement of a company.