Statement of owner's equity
Objective: Compute ending capital.
Recommended first: The income statement
Ending capital = opening capital + owner investments + net income − drawings (or − net loss). This statement links the income statement to the balance sheet.
The statement of owner's equity bridges the other two statements. Net income from the income statement increases capital; drawings decrease it; additional investments increase it. The ending figure must match Owner Capital on the balance sheet after closing.
Present it in a fixed order: opening capital, plus investments, plus net income (or minus net loss), minus drawings, equals ending capital. Each figure should be traceable — opening capital to last period's balance sheet, net income to this period's income statement, and investments and drawings to their accounts.
Check your work
- Did you start from the opening capital?
- Are investments, net income, and drawings all included?
- Does the ending figure agree with the balance sheet?
$10,000 + $0 + $2,900 − $500 = $12,400.
| Account | Debit | Credit |
|---|---|---|
| Ending Owner Capital | $12,400.00 |
Common mistakes
✗ Subtracting drawings from net income.
✓ Drawings reduce capital, not income.
Guided practice
Use hints freely here.
Item 1 of 1
Statement of owner's equity
Owner Capital began the year at $9,000.00. The owner invested $4,000.00 more, net income was $3,800.00, and drawings were $2,700.00. What is ending Owner Capital?
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Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 2
Close Owner Drawings
At Dec 31, 2026, Silverline Photography's Owner Drawings account has a $1,500.00 debit balance. Record the closing entry.
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References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.