Formal Definition:The owner's rights to the property (assets) of the business; also called proprietorship and net worth.
Informal Definition:What the business owes the owner. The good stuff left for the owner assuming all liabilities (amounts owed) have been paid.
Informal Definition:What the business owes the owner. The good stuff left for the owner assuming all liabilities (amounts owed) have been paid.
Additional Explanation:Owner's Equity represents the owner's claim to the good stuff (assets). Most people are familiar with the term equity because it is so often used with lenders wanting to loan individuals money based on their home equity. Home equity can be thought of as the amount of money an owner would receive if he/she sold their house and paid off any mortgage (loan) on the property.
Owner's equity (or net worth or capital ) is increased by money or property contributed and any profits earned and decreased by owner withdrawals and losses.
All Balance Sheets contain the same categories of assets, liabilities, and owner's equity.
All Balance Sheets contain the same categories of assets, liabilities, and owner's equity.
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