What all is included in equity?


1 Answer

  1. This answer was edited.

    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”

    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 –

    Equity in Balance Sheet










    I hope this answers your question.






    • 0

Leave an answer

You must login to add an answer.