What Is Equity on Your Balance Sheet?

Ask the Accountant…

Question: What is equity that shows on my Balance Sheet?

Answer: In the basic accounting formula, equity equals assets minus liabilities. Assets are what you own, such as your bank account and accounts receivables. Liabilities are what you owe, such as accounts payables and credit card debt. Equity is the difference, or what would be left over if you paid off all your liabilities from your assets. You could say that it is the part of the business that is yours, although it is more complicated than that.

The simplest and most relatable example I can think of is your home. If you own a house that is worth $500,000 (asset) and you have a mortgage of $300,000 (liability), your equity or the value of your outright ownership is $500,000 minus $300,000, or equity of $200,000.

QuickBooks Premier and Enterprise can be modified to better serve ad specialty distributors. Harriet Gatter is a QuickBooks ProAdvisor, a former accounting professor and a former ad specialty distributor. She advises ad specialty distributors to use QuickBooks Premier and Enterprise, often in conjunction with other industry-specific software, to manage the complexities of the ad specialty business, with the results being time saved, errors eliminated and an overall accurate accounting of your business. Contact her at hgatter@accountingsupportllc.com.