Owners Equity

Owners Equity (Definition)

Owners equity is the owners investment in the business minus the owners draws or withdrawals from the business plus the net income since the business began.

Key aspects of owners equity include:

1. Represents the residual interest in the assets of an entity after deducting liabilities
2. Also known as shareholders equity in corporations or net worth in sole proprietorships
3. Calculated as total assets minus total liabilities
4. Increases with profits and additional capital contributions
5. Decreases with losses and owner withdrawals
6. Used to assess the financial health and value of a business
7. Understanding owners equity is crucial for evaluating business performance and owner returns

Owners equity is a key component of the balance sheet and provides insight into the overall value of a business to its owners.