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.
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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.