Define Owner/Shareholder's Equity

Define Owner/Shareholder's Equity:

When we talk about the owner/shareholder's equity, it represents the share of the owner after paying the liabilities, less drawing & other withdrawal & by adding the net income (losses) amount from the beginning of the business, sometimes it is equal to the asset in the business.                                      

                                              Owner Equity = Assets - Liabilities

If ABC company buys a car amounting to $1,000,000/- and paid amount of $600,00/- from their available capital and of $400,000/- borrowed from any financing institution, then we'll consider the owner/shareholder's equity in that investment is of $600,000/ and liability is of $400,000/-.

Now the equation mention above will get easier to understand:

                                             Owner Equity = Assets - Liabilities

                                                600,000    =  1,000,000 - 400,000

                                                                        or

                                              Assets  = Owner Equity + Liabilities

                                                1,000,000 = 600,000  +  400,000