Small business accountants in Melbourne on what is owner's equity
When you are evaluating your business, you look at your liabilities and assets, as both play important roles in ensuring that your small business runs smoothly. You also need to take into consideration your owner’s equity, but what is it? Our small business accountants in Melbourne will tell you all you need to know.
Owner’s equity is defined as the capital employed into the business by the owner, which then has the owner’s draws deducted and the businesses net income added since the start of the business. In simpler terms, the amount of owner’s equity in the business is the amount of assets minus the liabilities.
Since most business accounts follow the cost principle, the amount of owner’s equity does not represent the current market value for your business. To determine the fair market value of your business feel free to contact our small business accounting services in Melbourne.
Owner’s equity is seen as a residual claim on the business assets, due to liabilities always having a higher claim, so it can be viewed as apart of your businesses assets.
Owner’s equity is a fairly simple component of the business to handle. If you need help, our small business accountants in Melbourne are always happy and willing to.