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Accounting & Tax vocabulary · Assets, Liabilities & Equity

Equity

Meaning in accounting & tax, with examples

/ˈekwəti/nounCore term

In accounting & tax, equity means: The owners' share in a business: what remains when all liabilities are subtracted from the assets. It includes paid-in capital and retained earnings.

In Turkish: özkaynaklar, özsermaye

How it is used

Shown on the balance sheet as shareholders' equity (US: stockholders' equity). The basic accounting equation is assets = liabilities + equity. Companies raise equity by issuing shares.

Example sentences

  1. The losses of the last two years have reduced our equity by almost half.

  2. Assets must always equal liabilities plus equity.

Common collocations

  • shareholders' equity
  • total equity
  • negative equity
  • raise equity
  • return on equity
  • assetSomething a business owns or controls that is expected to bring future economic benefit, such as cash, receivables, stock, machinery or software.
  • liabilityAn amount a business owes to others, such as suppliers, banks, employees or the tax office, which it will have to settle in the future.
  • retained earningsThe total profits a company has kept over the years instead of paying them out to shareholders as dividends. They form part of equity.
  • dividendA part of a company's profit that is paid out to its shareholders, usually in cash and in proportion to the shares they own.
  • balance sheetA financial statement that shows what a company owns (assets), what it owes (liabilities) and the owners' share (equity) on a specific date.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Assets, Liabilities & Equity

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This page explains English vocabulary for learners. It is not financial advice.