well the amount left over for me the equity in the house is fifty thousand dollars that’s my piece of the house in much the same way.
We can think of shareholders equity. We say okay, if company’s got a million dollars worth of assets and they have eight hundred thousand dollars worth of liabilities well the shareholders must own and control that last 200 grand.
In other words, if the company stopped dead tomorrow they use the assets and paid off the liabilities, what would be left for the shareholders.
It’s the shareholders piece of the pie and that’s how I want you to think of equity.
So again assets the stuff the company owns and controls it’s good for the company
Liabilities the stuff that the company owes the piece left over for the shareholders if they paid off all their liabilities using all their assets.
what’s left for the shareholders, what’s the shareholders piece of the pie that’s their equity.
that’s the shareholders equity.
A couple of key accounts in equity would be retained earnings and that is whenever a company makes money, the shareholders piece of the pie gets bigger and the account we use is called retained earnings. More on Taxation Brisbane.
There can also be preferred shares and all sorts of classes of shares in the beginning though we’re just going to look at normal common shares, also I’ll classify it under equity when the shareholders decide they want to take money out of their company, they’d taken in the form of a dividend and we’ll look at all of these terms.