What does the Statement of Owner's Equity demonstrate?

The Statement of Owner's Equity, also known as the Statement of Changes in Equity, captures how the owner's equity in a business has changed over a specific period. It specifically highlights the net income or loss of the company, which is a crucial factor impacting the overall equity. This statement reconciles the opening equity balance to the closing balance by adding the net income (or deducting the net loss) for the period, alongside any owner contributions or distributions.

This statement reflects the effect of the company's profitability on the owner's investment, thus making it essential for assessing the financial health and performance of the business over the reporting period. By showing how profits or losses have been incorporated into equity, it provides valuable insights into the success of the company's operations.