CHAPTER 6 Statement of profit or loss and statement of changes in equity 245
VALUE TO BUSINESS
• The statement of profit or loss presents the profit or loss made by the entity during the reporting
period. The statement of comprehensive income reports the profit or loss and other comprehensive
income. The statement of changes in equity explains the changes in equity from the start to the end
of the reporting period. The balance sheet shows the financial position of the entity as at the end of
the reporting period.
• The profit or loss for the reporting period is added to the retained earnings as at the start of the
period.
• The entity can make distributions from retained earnings (i.e. dividends or drawings) and transfers to
or from retained earnings.
• The balance of the retained earnings as at the end of the reporting period is included as an equity
item in the balance sheet.