| Owner’s Equity is the residual interest in the assets
of the enterprise. Therefore the owner’s equity section of
the balance sheet shows the amount the owner have invested
in the entity. However, the terminology ‘owner’s equity’ varies
with different forms of organization depending upon whether
the enterprise is a joint stock company or sole proprietorship/partnership
concern.
Sole proprietorship/partnership concern: The ownership
equity in a sole proprietorship or partnership is usually
reported in the balance sheet as a single amount for each
owner rather than distinction between the owner’s initial
investment and the accumulated earnings retained in the business.
Joint Stock Company: In the case of joint stock companies,
according to the legal requirements, owners’ equity is divided
into two main categories. The first category called share
capital or contributed capital. It is the amount that owners
have invested directly in the business. The second category
of owners’ equity is called retained earnings.
In the other words Owners’ equity is the claim against the
assets of a business entity. It could be expressed total assets
of an entity less claims of outsiders or liabilities.
What is on Owner’s Equity? |
Accounts
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