The nature of equity

A pictorial presentation of a balance sheet showing assets of £50,000, liabilities of £30,000 and equity of £20,000.

Of the five financial statement elements, equity is the most mercurial. In part, because it’s measured as the amount of recognised assets less the amount of recognised liabilities, expressed in this form of the accounting equation. Assets – Liabilities = Equity (net assets) Measuring total equity as a residual is what makes balance sheets balance.… Continue reading The nature of equity