start up business grants

Equity is the owner’s contribution to a business let me go through this very slowly it’s very important so take your time on this look at the screen in front of you equity is the owner’s contribution to a business how do you become a owner generally the owner buys the company’s common stock so stockholders are owners of a company the most talk you have the more say you have in the business for example Bill Gates is the owner of Microsoft he owns the majority of the stock so equity comprises common stock there’s another element equally it’s called retained earnings what are retained earnings retained earnings are accumulated profits of the business.

Let me give you an example let’s say you just started a business this year say the profits are 10,000 at the end of the year you put 10,000 in a special account called retained earnings next year let’s say your bottom line profit was 30,000 what do you do with the 30 you take it and put it in a special account called retained earnings so what’s the balance of the retained earnings now it’s 10 from the previous year and 30 from the current year so it’s 40 and so on retained earnings are considered part of equity because it belongs to the owners remember the profit of a business belongs to the owners now we come to another accounting formula this is where we start with the form the real deal first accounting formula network of a company is assets less liabilities this very important formula.

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