Owner's Equity

What is Owner's Equity?

Owner's Equity represents the owner's residual interest in the company after all liabilities have been deducted from its total assets. It is essentially what the owner owns outright, reflecting the net value of the entity.

Short Description: The value remaining for the owner after all liabilities have been subtracted from assets.

• Assets: Any resource owned by the company that provides future economic benefits.
• Liabilities: Obligations or debts the company owes to external parties.
• Net Worth: Owner's Equity is often referred to as the owner's net worth in the business.
• Equation: Owner's Equity = Total Assets - Total Liabilities

Owner's Equity can increase through direct investments into the company or via retained earnings from business activities. Conversely, it decreases when an owner withdraws funds or when losses are realized.