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THE STATEMENT OF OWNER EQUITY PowerPoint PPT Presentation


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THE STATEMENT OF OWNER EQUITY. EXAMINES CHANGES IN OWNER EQUITY IN THREE CATEGORIES: 1)RETAINED EARNINGS AND CONTRIBUTED CAPITAL 2)PERSONAL NET WORTH 3)CHANGE IN VALUATION EQUITY.

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THE STATEMENT OF OWNER EQUITY

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The statement of owner equity l.jpg

THE STATEMENT OF OWNER EQUITY

  • EXAMINES CHANGES IN OWNER EQUITY IN THREE CATEGORIES:

    1)RETAINED EARNINGS AND CONTRIBUTED CAPITAL

    2)PERSONAL NET WORTH

    3)CHANGE IN VALUATION EQUITY


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  • AN IMPORTANT ASPECT OF UNDERSTANDING THE FINANCIAL PROGRESS OF A BUSINESS IS TO SEPARATE THE CHANGE IN EQUITY FROM RETAINED EARNINGS FROM THE CHANGE IN EQUITY FROM CHANGES IN THE MARKET VALUE OF ASSETS.

  • WITHDRAWALS OF NET INCOME OR RETAINED EARNINGS FOR FAMILY LIVING AND PERSONAL INVESTING ARE CRITICAL ITEMS IN RECONCILING OWNER EQUITY.


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  • CHANGES IN OWNER EQUITY =

    NET INCOME

    MINUS WITHDRAWALS

    PLUS (MINUS) CAPITAL ADDITIONS (DISTRIBUTIONS)


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  • WITHDRAWALS REPRESENT ANY USE OF NET INCOME OR BUSINESS CAPITAL WHICH MAKES THAT INCOME OR CAPITAL NO LONGER AVAILABLE FOR BUSINESS USE.

  • CHANGE IN PERSONAL NET WORTH IS A SIMPLE COMPARISON OF BEGINNING AND ENDING PERSONAL NET WORTH FIGURES. ONLY EFFECTS THE MARKET VALUE MEASURE OF OWNERS EQUITY.


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  • CHANGE IN VALUATION EQUITY AFFECTS ONLY THE MARKET VALUE OWNER EQUITY. VALUATION EQUITY IS THE DIFFERENCE BETWEEN THE CASH VALUATION NET WORTH AND THE MARKET VALUATION NET WORTH.


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STATEMENT OF CASH FLOWS

  • THE STATEMENT OF CASH FLOWS FOCUSES ON CASH FLOWS AND SEGREGATES THEM INTO CASH FLOWS FROM OPERATING, INVESTING, AND FINANCING ACTIVITIES.

  • OPERATING ACTIVITIES GENERALLY INVOLVE PRODUCING AND DELIVERING GOODS AND PROVIDING SERVICES.

  • INVESTING ACTIVITIES FOCUS ON CASH FLOWS FROM THE PURCHASE AND SALE OF CAPITAL ASSETS AND NON-FARM ASSETS.

  • FINANCING ACTIVITIES INCLUDE BORROWING AND REPAYMENT OF LOANS.


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  • THE STATEMENT OF CASH FLOWS LINKS TOGETHER CASH , ACCRUAL INCOME AND BALANCE SHEET INFORMATION.


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