Owners Equity

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.