ACCA Financial Reporting (F7) Practice Exam 2025 – Complete Prep Guide

Question: 1 / 400

What is the primary purpose of a 'statement of changes in equity'?

To report cash flows from activities

To show the movements in equity accounts over the reporting period

The primary purpose of a 'statement of changes in equity' is to show the movements in equity accounts over the reporting period. This statement provides a detailed account of how equity changes arise from various transactions and events, such as new share issues, dividends paid, and retained earnings from profits or losses. By tracking these movements, stakeholders can better understand how a company’s equity position has evolved during the period.

This statement complements the balance sheet by revealing the sources of changes in shareholders' equity, offering insights into the distribution of profits and losses and how these have impacted the equity holders. It plays a crucial role in financial reporting, as it clarifies how transactions with owners and retained earnings from business operations contribute to the overall equity structure of the organization.

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To disclose financial performance

To summarize income and expenses

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