Farm Statements: Statement of owner equity

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
NAME:                                                                                                                       YEAR:
Owners` equity as at previous year
(+) owners` investment
Total
(-) owners` draws
Owners` equity at end of year

 

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