The financial accounting term owner's equity is used to describe the resources that are owned by the common and preferred stock shareholders of a company. Owner's equity is reported on a company's balance sheet.
Owner's Equity = Assets - Liabilities
Also known as shareholders equity and the net worth of a company, owner's equity is considered a "residual" claim against the assets of a company since the claims of creditors must be satisfied before those of the owners. Increases in owner's equity can come from two sources:
The subsections appearing in the owner's equity portion of the balance sheet include:
Owner's equity is one of the three major divisions of the balance sheet, the other sections being liabilities and assets.
The table below illustrates the format for the owner's equity section of the balance sheet.
|Other Stockholder Equity||-$5,025,000|
|Total Owner's Equity||$15,420,000|