Owners equity

Owner’s Equity

The residual interest in the assets of a business after deducting liabilities, representing the owner’s investment plus accumulated profits minus any withdrawals.

For example, a sole proprietorship with $150,000 in assets and $70,000 in liabilities would have owner’s equity of $80,000, reflecting the owner’s financial interest in the business.

In sole proprietorships and partnerships, owner’s equity includes capital contributions and accumulated profits or losses, adjusted for withdrawals. This differs from corporations, where shareholders’ equity is divided into common stock, additional paid-in capital, and retained earnings. Owner’s equity increases with profits and additional investments, and decreases with losses and owner withdrawals.