What is Equity?

Wondering what is equity? Equity is the difference between your assets and liabilities. Your equity is your net worth. For example if your assets consist of $3000 in cash and $2000 in equipment totaling $5000 and your liabilities consist of $2200 in credit card bills, your equity or your net worth is $2800.

Another way of looking at equity is to call it owners equity, or the total that you own out right, either personally or in business.

Equity and The Balance Sheet

Your balance sheet lists all assets, liabilities and equity of your company as of a given date. You can read more about the balance sheet here.

Equity Statements

Equity statements can be created separately or as a part of your balance sheet. For more about equity statements, click here.

Equity Accounts

Opening Balance Equity consists of the accumulated total of all your assets and liabilities the day before the start date of a given accounting period.

Owners Contributions consists of all assets contributed to the company by the owner, for example cash investments the owner makes into the company.

Owners Draws consists of personal withdrawals the owner makes from the company. Usually in a small business, the owner will receive their fee this way instead of taking a paycheck so as not to have to pay double payroll taxes.

Retained Earnings consists of the net profit taken from the Income Statement for the given accounting period.

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