The owner's equity isa. added to assets and the two are equal to liabilities b. added to liabilities and the two are equal to assets c. subtracted from liabilities and the net amount is equal to assets d. subtracted from owner's equity and the net amount is equal to net income

Question

Business

Nola Walton

8 January, 03:10

The owner's equity isa. added to assets and the two are equal to liabilities b. added to liabilities and the two are equal to assets c. subtracted from liabilities and the net amount is equal to assets d. subtracted from owner's equity and the net amount is equal to net income

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Answers (1)

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Benson · Answer 1

The correct answer is letter "B": added to liabilities and the two are equal to assets.

Explanation:

Owner's equity mostly known as the shareholders' equity is a measure of a company's net worth. Shareholder's equity is calculated using the following formula:

Shareholders' Equity = Total Assets - Total Liabilities

Thus:

Shareholders' Equity + Total Liabilities = Total Assets

Shareholders' equity comes from two pots of money: the first port has money that was initially invested in the company, and any subsequent investments. The second pots contain retained earnings that are the gains the company holds on to and do not pay out as dividends to its shareholders.