The Statement of Owner Equity is a financial statement that analyzes why a farmer’s Net Worth (or Owner Equity) changed the way it did in the past year. This change in Net Worth is caused by a number of factors such as:
- earning money
- spending money
- paying taxes
- inheriting or receiving gifts
- giving away gifts
- having debts forgiven
- having his/her assets inflate or deflate in value.
By simply comparing the Net Worth from one year to another the farmer can tell whether it went up or down but he/she will not know which of the mentioned forces caused the change.
The owners` equity statement is prepared at the end of the year or business cycle with the Balance Sheet and Income statements.
Explanation of some terms
- Owners` equity as at previous year: this is the owners` equity at end of year in the last business cycle
- Net Income/loss: This is the income value from the income statement
- Owners` draws/drawings: these are the items that the business owner takes from the business for personal use. The value is derived from the balance sheet.
- Owners`s investment: this is the total amount that the owner invested into the farm business during that business cycle.
Example of Owners` Equity statement
|STATEMENT OF OWNER EQUITY
|Owners` equity as at previous year
|(+) owners` investment
|(-) owners` draws
|Owners` equity at end of year