Shareholder's Equity Meaning - Shareholder's Equity is the amount invested into the Company. It represents the Net worth of the Company. It is also where the owners have the claim on the Assets after the Debts are settled. It Calculation of Shareholder's Equity Method 1 Shareholder's Equity = TotalRead more
Shareholder’s Equity
Meaning – Shareholder’s Equity is the amount invested into the Company. It represents the Net worth of the Company. It is also where the owners have the claim on the Assets after the Debts are settled. It
Calculation of Shareholder’s Equity
Method 1
Shareholder’s Equity = Total Assets – Total Liabilities
Method 2
Shareholder’s Equity = Share Capital + Retained Earnings – Treasury Stock/Treasury Shares
Components of the Shareholder’s Equity
From the above Method 1, it can be understood that shareholder’s equity comprises of
Net Assets = Current Assets + Non-current Assets, reduced by
Net liabilities = Current liabilities + Long-term liabilities
where Long-term liabilities = Long-term debts + Deferred long-term liabilities + Other liabilities
Also from the method 2,
Share Capital = Outstanding shares + Additional Paid-up share capital
Retained Earnings are the sum of the company’s earnings after paying the dividends
Treasury stocks = Shares repurchased by the company
Example of Shareholder’s Equity
The shareholder’s Equity is represented in the Balance Sheet as below;
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Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year. Non-current assets can be fixed assets and intangible assets. Fixed assets areRead more
Non-current assets are long-term investments that are not easily converted into cash within an accounting year. They are required for the long term in the business. They have a useful life of more than an accounting year.
Non-current assets can be fixed assets and intangible assets. Fixed assets are tangible assets that can be seen and touched. Whereas, intangible assets are those assets that can not be seen and touched.
You can correlate examples of Non-Current Assets with tangible and intangible assets as mentioned below:
Land and building – They are fixed assets that will give long-term benefits and will be classified as noncurrent assets.
Plant and Machinery – They are tangible assets will give future benefits and are thus mentioned under noncurrent assets.
Office Equipment – They are tangible assets that will give future economic benefits to the company, and comes under noncurrent assets.
Vehicles – They are tangible assets that will give long-term benefits, and will be classified as noncurrent assets.
Furniture – They are also tangible assets that will give future benefits and are classified as non-current assets.
Trademarks – These are intangible assets that will not be easily converted into cash and will be classified as noncurrent assets.
Goodwill – They are intangible assets that can’t be easily converted into cash, and are classified as non-current assets.
Patents – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Copyrights – They are intangible assets that will not be converted into cash within an accounting period, and are classified as non-current assets.
Long-term Investments – They are long-term investments that will not be easily converted into cash within an accounting period and are classified as non-current assets.
Non-current Assets = Total Liabilities – Current Assets
Current Assets are the assets that will be converted into cash within an accounting year. They include cash, bank, debtors, etc.
BALANCE SHEET
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