Equity

What is Equity?

Equity, also called owner's equity or shareholders' equity, represents the residual interest in business assets after deducting all liabilities. It includes capital contributed by owners, retained earnings, and reserves. Equity = Assets - Liabilities. It reflects the book value of the business and shows how much owners would theoretically receive if all assets were liquidated and liabilities paid. In Tally, equity is shown on the liabilities side of the balance sheet.