Owner's equity.
In plain English
Owner's equity is the owner's stake in a business, calculated as total assets minus total liabilities. It is the business version of net worth: what would be left for the owner if the company sold everything and paid every debt. It grows when the business earns and retains profit or the owner puts money in, and it shrinks with losses or owner withdrawals. On a balance sheet it is the third piece that makes assets equal liabilities plus equity. For corporations the same idea is called shareholders' equity.
01Why it matters
Owner's equity is the clearest single measure of what a business is actually worth to its owner, so tracking it shows whether the business is building or losing value over time.
02The math, step by step
A business has 120,000 dollars in assets and owes 70,000 dollars. Owner's equity is 50,000 dollars, the 120,000 minus the 70,000, which is the owner's real stake in the business.
03What this is NOT
Owner's equity is NOT available cash. It is assets minus liabilities, much of which may be tied up in equipment, inventory, or receivables, not money you can simply withdraw.
04Receipts
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