Glossary · Financial statements
Owner's equity
Owner's equity is the owner's share of a business: what is left of the assets after all liabilities are paid. It equals assets minus liabilities. It rises with money the owner puts in and with profits, and falls with losses and money the owner takes out. In a corporation it is called shareholders' equity.
Glossary / Owner's equity · Also called owner's capital, net worth, shareholders' equity
How it works
The balance sheet is built on the equation assets = liabilities + equity. Equity is the balancing figure: what the business would leave the owner if everything were sold at book value and every debt paid.
For a sole proprietor, equity usually has a few parts: contributions (money and assets put in), draws (money taken out) and accumulated profit. A negative equity figure means the business owes more than it owns, which lenders notice.
In a corporation the same idea is called shareholders' equity. It is made up of share capital, the money shareholders paid for their shares, and retained earnings, the profits kept in the company. Owners of a corporation take money out as salary or dividends, not as draws.
Worked example: Working out equity
A sole proprietor's business has $48,000 of assets: $12,000 in the bank, $8,000 of receivables and a $28,000 vehicle. It owes $6,000 to suppliers and $20,000 on the vehicle loan.
Owner's equity is $48,000 - $26,000 = $22,000. If the owner invested $10,000, took $18,000 of draws and the business earned $30,000 of profit since it began, those three pieces add up to the same $22,000.
| Equity piece | Amount |
|---|---|
| Contributions | $10,000 |
| Accumulated profit | $30,000 |
| Draws | -$18,000 |
| Owner's equity | $22,000 |
In AcboBooks
The starter chart includes Owner's Equity (3100) and Owner's Draw (3200) as equity accounts, alongside Opening Balance Equity and Retained Earnings. The Balance Sheet report shows them under equity with the year's net income.
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Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.
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