## Where to find equity in accounting?

Equity in accounting refers to the sum of money that is returned or paid to the owners/shareholders at the time of winding up of the company once all of the assets are liquidated and the liabilities are paid off. It is generally referred to as Shareholder's equity or Owner's equity. It can also be cRead more

Equity in accounting refers to the sum of money that is returned or paid to the owners/shareholders at the time of winding up of the company once all of the assets are liquidated and the liabilities are paid off. It is generally referred to as Shareholder’s equity or Owner’s equity. It can also be calculated with the help of a formula derived from the accounting equation which is as follows:

 EQUITY = TOTAL ASSETS – TOTAL LIABILITIES

# Treatment of equity in accounting

Equity is shown in the balance sheet under shareholder’s equity, which is a result of the difference between the total assets and total liabilities of the company. I would like to explain this concept further with the help of an example which is as follows:

## Example

The following is the balance sheet of XYZ Ltd. which shows their Equity, Liability, and Assets during the current financial year.

Balance sheet as at 31st March, yyyy

 PARTICULARS NOTE NO. AMOUNT EQUITY AND LIABILITIES Shareholder’s Fund Share capital 1,00,000 Reserves & Surplus 40,000 Non-Current Liabilities Long- Term Borrowings 14,000 Current Liabilities Short term borrowings 3,000 Trade Payables 6,000 Short Term provision 3,000 Total 1,66,000 ASSETS Non-Current Assets Fixed assets 1,10,000 Current assets Inventories 20,000 Trade Receivables 30,000 Cash and bank balance 6,000 Total 1,66,000

NOTE: As mentioned earlier, equity represents the difference between the total assets and total liabilities which can be easily recognized in the balance sheet given above.

Total Assets = 1,66,000

Total Liabilities = 26,000

Equity = Total assets – Total liabilities

= 1,66,000 – 26,000

= 1,40,000

Hope this helps.

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## What all is included in equity?

We will first quickly run through the concept of equity - Equity is the capital raised by a company for the purpose of purchase of assets or for making an investment in a specific project or for the smooth functioning of operations. It's important as it represents the value of an investor's stake inRead more

We will first quickly run through the concept of equity –

Equity is the capital raised by a company for the purpose of purchase of assets or for making an investment in a specific project or for the smooth functioning of operations. It’s important as it represents the value of an investor’s stake in a company.

It can also be aid that its the sum of money that the company is required to pay at the time of its liquidation to its shareholders after realising all of its assets and paying off all of its debts. Equity is presented in the financial statement as a component of a Balance Sheet.

The formula for calculating the company’s equity –

Shareholder’s Equity = Total Assets – Total Liabilities

## Inclusive list of items under the head” Equity”

 Particulars Equity Share Capital Reserves and surplus 1. Securities Premium Reserve 2. General Reserves 3. Capital Redemption Reserve 4. Revaluation Reserve 5. Debenture Redemption Reserve 6. Share Option Outstanding Account 7. Others- (Specify the Nature and Purpose of such reserve) 8. Retained Earnings Other Comprehensive Income 1.  Foreign Currency Translation Reserve 2.  Cash Flow Hedge Reserve Vesting and Exercise of Warrants Issuance of Non-Controlling Interest Repurchase of Stock option Issuance of Common Stock Stock-Based Compensation Exercise of Stock Options Additional Paid-in Capital The Cumulative Effect of Changes in Accounting Principles related to Revenue Recognition, Income Taxes and Financial Instruments

It is generally presented under two subheads – Equity and Other Equity.

The extract shown below indicates the position of Equity in a Balance Sheet –

Aastha

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