Accounting 101, Lesson # 14: Owner's Equity

Hi guys, what's up?

Hope everything's fine.

Last time I've given you a list of commonly used liability account titles. (which you can see here)

This time however, we'll have a brief discussion on equity at the same time I'll also give you a short list o generally accepted equity account titles.

So... let the learning begin!

Equity

Equity is simply the net worth of the business entity -meaning the residual value of the entity's assets after deducting all it's liabilities.

Broadly used, equity is another word for claim, - owner's claim and owner's interest over the business entity.

Kinds of Equity

• Proprietor's equity - the generally accepted equity title for a single proprietorship type of business.
• Partner's equity - the generally accepted equity title for a partnership type of business.
• Stockholder's equity - the generally accepted equity title for a corporate type of business.

Examples of Equity Account Titles

The equity accounts of a single proprietorship form of business enterprise.

• Capital - the investment of the owner(s) whether initial or additional.
• Drawing - personal withdrawals of the owner(s) that decreases the value of equity.

The equity accounts of a partnerhip form of business enterprise is almost the same as that of a single proprietorship, the only difference is that it has a seperate capital and drawing accounts for each partner.

On the other hand a corporate form of business has a more complex equity section, examples of account titles are as follows;

• Ordinary share capital
• Preference share capital
• Share capital subscribed
• Additional paid-in capital
• Retained earnings

Well, I think that's about it. Next time we'll discuss the accounting cycle.

For now, I bid you farewell...

Until then,