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Owner's Equity in a company represents the resources that have been invested by the owners of the company. Owner's equity is considered a "residual" claim against the assets of a company because the claims of creditors must be satisfied before that of the owners. Increases in owner's equity come from two sources: - Initial and any additional investments by the owner
- Earnings resulting from the profitable operation of the company
The calculation of owner's equity is: Owner's Equity = Assets - Liabilities The statement of owner's equity in a company can be found on the Balance Sheet. |