What Is Equity in Accounting?

In accounting, equity is the value of your business after subtracting what your business owes. You might hear it called owner’s equity, for a sole proprietorship, or shareholder’s equity, for a corporation.

Equity is reported on the balance sheet. It’s calculated by subtracting liabilities (what you owe) from assets (what you own). So, assets minus liabilities equals equity.

Understanding equity is important so you know what your business is worth and how much you have at stake. It’s also something investors and potential business partners will want to see.

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