What
is equity?
Equity is the residual interest of the equity holder
in the asset of the organization after deducting all liabilities. The residual
interest may be known as net assets. The equity may be classified into
different segments i.e. reserves, retained earnings and paid up capital for
decision making need of user.
How
equity is calculated
Equity is calculated by deducting all liabilities (i.e.
long term and short term) from the total assets.
Example
of equity
|
Paid
up capital
|
1,000,000
|
|
Retained
Earning
|
500,000
|
|
Share
premium account
|
400,000
|
|
Equity
|
1,900,000
|
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