 In this presentation, we will put together a statement of stockholders equity from a trial balance. Trial balance is going to be a fairly simple trial balance here, but I think it's important to see that the trial balance is in balance, so we can see all the accounts here, and then pick up the important parts, the ones we want to find a home for, that being of course the blue section, the equity section. So our trial balance is in order. We've got assets, liabilities, equity, revenue, and expenses. Assets in green, liabilities in orange, equity in blue, and revenue and expenses, income statement accounts in the dark blue. The debits are going to be non-bracketed, credits will be bracketed, or debits positive and credits negative for Excel. Debits minus the credits equals zero. So the debits equal the credits, that's what this green zero represents. Net income is revenue minus expenses of revenue of 500,000 credits minus the debit of 75,000 expense, and so we have the 425 of revenue. Now we're going to have a fairly simplified statement of stockholders equity. Our main purpose here is just to show the difference between a full statement of stockholders equity and just the statement of retained earnings. And remember that if we are to see the change here from the statement of equity, most of the change will typically be here on the retained earnings side because if we compare the statement, the equity section from a corporation to that of a sole proprietor or partnership, remember that a sole proprietor or partnership breaks out each equity section by who owns it, and that's by an individual owner. We'll name the owner and have a capital account. In a corporation, we don't have to name the owner because they're all the same, it's just an amount of shares. So the shares are all the same. And so what we want to break out then is not by who owns them, but by initial investment versus the retained earnings, how much has been earned over the initial investment, how much has been given out in the form of dividends. So that's the breakout here. So this is the initial investment. This is all the revenue that's been generated over the life of the company less what has been given out in terms of dividends. So normally after the initial investment, there might not be any more stock sales. So therefore, and that's the case we're going to show here. We're going to say, hey, there's no more stock sales. So this amount is basically static. It's the same from the beginning to the end unless there was more sales of stock. And this amount here is really where the activity happens, which is similar to a sole proprietor or partnership where we close out net income to the capital account for a sole proprietor or partnership. We close it out to a corporation to retained earnings. And then the dividends we're going to break out separately so that we can see them here and then close them out to retained earnings. So if we set up our statement of retained earnings then, we have to be a little bit more calm. If we set up the statement of stockholders equity, we have to be a little bit more complicated to have these columns here rather than like a sole proprietor which would only have everything that would be closed out to a capital account. So if there's nothing happening here, it may be enough for us to just break out retained earnings because that's where the difference is. But that will only give us the activity here and in order to see the activity and come out to the full statement of equity, which is all this, to come out to $1,368,000, which is assets minus liabilities, we will have to include the full statement of stockholders equity, which we will do here. So we're going to start off, so first you want to just know how to set up the table. So you would at a minimum need the common stock that we're going to record in terms of the par value, the paid in capital, which will reflect this amount, the retained earnings, which is this amount, this is really where most of the activity will happen. Now if there was Treasury stock, I'm not going to include Treasury stock because again I'm going to try to keep it, you would need Treasury stock and paid in capital for Treasury stock. And then we're just going to sum everything up and get the total equity, which will result in the total. So you want to see a table something like this which will basically represent each of the components, in this case just the investment component stockholders equity paid in capital in column format rather than kind of in row format. And then the retained earnings in one column, which is all of this. This is just going to reflect the activity in a column here. So let's do this. We're going to say that the balance for the beginning of the year, I'm just going to say January 1st, it might represent the end of last year, 2000X1. And we're just going to pull over this information. Now again we're going to say that there was no, there was no other investments, no stock sales from the company, which could be the case. There's a lot of stock sales from people to people, but it could very well be the case that from a year or from a time period from a month, there's no other stock sales from the company to issue new stock. And so then all we have to do then is say, well this must be the beginning balance. There's no activity in that case. So this amount of trial balance is the same from beginning to end. That is our beginning balance. We could check, to double check that, the general ledger. So I'm just going to flip the sign. I want to make this a positive, negative to flip the sign instead of equals of that number. And then I'll flip the sign. There's the 660,000. We found a home for that number. And then the paid in capital, again, same thing. If there was no issuance of stock through the time period, the paid in capital is going to be the remaining, the same through the entire time period. It's static because we already, if we already sold the stock and we started the company, there's no new stock sales to people who own the company, own the company. They may trade with other people amongst themselves, but we're saying that there's no stock sales from the company to new investors. So I'm going to do the same thing, negative instead of equals that 230 and enter. And we found a home for that. Now the thing that will change is retained earnings. And that will be the similar component to a sole proprietor or a partnership in the closing process. We have retained earnings here. This is our retained earnings, and that's really the beginning balance as of the beginning of the year. What we're going to do to it is the change, which includes closing revenue out to it. And we broke the dividends out here separately. So note that if the dividends weren't not broken out in a separate account, as they could be just taken right out of retained earnings, we have to go to the GL and then see the activity. So in here, we're going to say, this is the beginning retained earnings. All of this, 478 will be the ending retained earnings. So I'm going to start here. This is what the retained earnings as of January. This is the most confusing component of the statement of equity because it doesn't really say, usually the trial balance will say as of the year end. And this isn't really a year end number. That's a year beginning number so we're going to do the same thing. I'm just going to say this is negative of that retained earnings. That's our beginning number. We found a home for that now. So our beginning total equity at the beginning is the sum of all these and this should match our statement of equity stockholders equity ending balance from last year. So we'll sum this up equals the sum and then we'll add this up and just add these columns up. So the 660, 230, 317 add up to the 1,207,000. Now we're going to put in the activity. Now remember these two aren't going to change. We're just going to pull these down because it wasn't any other stocks that were issued. What we're going to do is be dealing with the retained earnings. That's why this is the important column most of the time. And what's going to happen and we're going to have a plus net income just like we normally would for a partnership or a sole proprietor closing out to the capital or partnership closing out to the capital accounts. Now we're closing it out to retained earnings account. So that's going to be this amount the 425 representing these two items here. So again I want to flip the sign and make it a positive number. So I'm going to say negative of that number and just by doing that this number would also be on the income statement clearly. We're going to say we found a home for basically all of this so we found a home for all of this now. The only thing we haven't found a home for then is going to be the dividends. Now there's not anything here so I'm just going to sum this up this way just like we did here for our table. So we're just going to equal the sum and I'm going to sum all the sales even though they're empty. So we'll sum the whole thing and there we have that. Now we're going to say that the dividends are kind of like draws. They're going to be taken out from O to the owner and we're going to take it out of the earnings. We're not going to take it out of the initial investment. So we're going to say less the draws or less the dividends we should say. And that's going to be this number here. So we're going to say less dividends declared that's going to be this number here. So I'm going to put that in the retained earnings in O12 and I'm going to keep it as a positive number for the problem telling our reader it's a subtraction problem with words by saying less. So I'm just going to say equals that 264. And now we found a home for that item. Now I'm going to go ahead and sum this up again equals the sum of the entire column or row to sum of the row. So you got to be careful it's just a table right so we're summing this way and then at the end we'll be able to sum up all the ways vertically and horizontally and should check out. Now just note that there's two the two things that we're not having here is if there was an issuance of common stock that would be the other thing that would happen basically to the common stock column if we issued more common stock we're going to say there's no activity there so we'll keep it zero and then if there was any kind of repurchase of common stock then those would be some activities that could deal with something other than just normal transactions in terms of the closing process here so I'll just note that if we sum this up again I'm just going to copy these down and just bring those zeros down there's no activity which means we don't need to put these two rows in there in that case but just to note them then that'll give us the retained earnings at the end of the day so now we're looking at the balance I'm just going to copy this and I'm going to paste it here and we'll just change the date to December 31st now so we started off at the beginning of the year now we're going to have the ending of the year here so we'll put our totals in here and note that these are going to be static because there wasn't any change over the time period what we really care about is the statement of retained earnings and it might be easiest for us to actually look at the statement of retained earnings first and do the calculation here and then apply the same kind of calculation to the rest of the activity so in other words the statement of retained earnings just like any kind of closing process is going to have the beginning balance which in this case was 317 it's going to go up by the net income just as it would if it was a capital account for a sole proprietor or a partnership so we're going to increase that by 425,000 and then it's going to go down by what we gave to the owners if it was a partnership or sole proprietor it would be called draws in this case it's dividends for a corporation minus the 264,000 so it's important to note that that's going to be a minus there and then we're going to have the 478,000 so we'll do that with formulas here now so we're going to say this equals the retained earnings plus the net income minus the dividends declared now these two just to have a uniformity so we can copy and paste the formula clearly the issuance of stock and I'm not sure it's so that looks better the issuance of stock has nothing to do with retained earnings but we know for the total equity section if we issued stock it's going to increase equity so that's going to be over here in the capital section if we were to do that and the repurchase of stock we know it has nothing to do with the retained earnings column but it's going to reduce total equity typically so if we just put that in the formula then we can copy and paste the full formula to whatever cell is applicable so I'm going to go ahead and add that and say plus this zero column minus this repurchase and the reason I'm going to do that is because then I can just copy and paste this formula so if I say enter then that has everything included so if there was any activity in these columns then I wouldn't have to retype the formula I could just copy this formula and put it here and paste the formula and it would do the same thing if there was any numbers and I could put that even in the total right click and paste and that will give me the total here which will be it's not going to be the sum, it's going to be this plus this minus this which should match the entire one, three, six, eight now that's why I'm going to do that but I'm going to delete that and we're going to do the whole thing just one more time just so we can do it again and see each column so the common stock there's no difference there's no change but again we could put the same formula in there to match to have the uniformity which would just be the the 660 start and then it would go up by net income there's no net income because that goes to the retained earnings but I could still just put the same formula in minus the dividends, there's no dividends for the common stock because that's part of retained earnings but we're going to match the formula all the way across plus the common stock issuance if we issued common stock it would increase and then if we repurchased any common stock that would be a decrease and that would be the 660 we'll do the same thing for the paid in capital again the paid in capital is the excess of the common stock that during the issuance and there was no issuance so I'm going to say this is the beginning balance plus net income again net income shouldn't be affecting paid in capital it never will but we're just going to copy the uniformity of this for total equity total equity would be affected and therefore we can just use the same formula here and then minus the dividends plus the issuance if there were one minus the repurchase and enter and then the retained earnings we can do the same for the total equity here so I could say total equity equals the beginning balance plus the net income minus the dividends plus the issuance if there were one minus any repurchase if there were one now the nice thing is we should be able to double check this this way as well these total should also tie out so it does 1,368 that's kind of how the Excel table should work we should be able to check it this way and then check it this way and we may even want to do a little sum function underneath to give ourselves that double check now so note that the statement of retained earnings is where all the activity happened but the total here also shows all the activity will include the common stock and paid in capital so if we just see the statement of retained earnings and we know there was no activity in these two accounts then that gives us what we need because this statement is telling us what the change is and if there's no change here then we don't need to see that activity it's going to be the same as the prior so what we're really looking for is this activity but in order to see the book value the assets minus the liabilities of 1,368 or to see the entire equity section which of course will also be 1,368,000 we need to include the entire thing and therefore include the common and paid in capital having the entire statement of stockholders equity