What does equity play in the accounting equation?

[accountinglads]

equity is what the owner or the share holders are entitled to after payment of all debts to the company. In the accounting equation, equity can be computed as Equity = Assets -Liabilities. It contains such items as capital contribution, retained earnings and in a few cases also reserves. In the process of a business making a profit, equity grows. Equity will go down in the case of incurring business losses or dividend payments. Equity will enable the stakeholders to ascertain the value that the owners have in the business after satisfying all obligations.

Recommend blog: https://www.wallstreetprep.com/knowledge/accounting-equation/

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