Owners Equity | Formula | Calculation (with Example)

In this video, we will study definition, formula and practical example of Owners Equity to understand it better.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐎𝐰𝐧𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲?
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Owners Equity is the ownership of proprietor in the business, i.e. the amount of business assets owned by the shareholders.

𝐎𝐰𝐧𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Owners Equity Formula = Assets - Liabilities

𝐎𝐰𝐧𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲 𝐄𝐱𝐚𝐦𝐩𝐥𝐞
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XYZ International Company is having following data.

Equipment Rs 600000
Inventory Rs 100000
Business Debtors Rs 300000
Bank loan Rs 400000
Business creditors Rs 300000

As we know Owner's equity formula = Assets - Liabilities

Therefore, Asset = Equipment +Inventory +Business Debtors
= Rs 600000 + Rs 100000 + Rs 500000
=Rs 1200000

Liabilities= Bank Loan + Business Creditors = Rs 400000+ Rs 300000 =Rs 700000

By using below formula we get,

Owners Equity Formula = Assets –Liabilities
= Rs 1200000- Rs 700000
Equity =Rs 500000

𝐎𝐰𝐧𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲 𝐂𝐨𝐦𝐩𝐨𝐧𝐞𝐧𝐭𝐬
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#1 - Divided Capital
#2 - Extra Paid-in Capital
#3 - Retained Income
#4 - Other Comprehensive Earnings

To know more about the 𝐎𝐰𝐧𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲 , you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:-

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