Equity represents the owner's residual interest in the assets of a business after deducting liabilities. It is calculated as Total Assets minus Total Liabilities.
5 Must Know Facts For Your Next Test
Equity is reported on the Balance Sheet.
Types of equity include common stock, retained earnings, and additional paid-in capital.
An increase in revenues or owner contributions increases equity.
A decrease due to expenses or withdrawals by the owner decreases equity.
The Statement of Owner's Equity shows changes in equity over a period.
Review Questions
How is equity calculated?
What types of accounts are included under equity?
Which financial statement details changes in equity?