 
You can use this simple equation to see how much Equity you have in your business!
Don’t worry, it’s not as complicated as the picture! 🙂
The Accounting Equation is this: Assets = Liabilities + Equity
Assets are what you own. Most of the time, assets are tangible, physical items, like cash, cars, land, and equipment. Intangible assets can also exist, like a business’s logo.
Liabilities are what you owe other people, like a credit card, payroll taxes that haven’t been paid yet, or a loan. Some of the time, you take out a liability in order to obtain an asset (like taking out a loan to buy a house.)
Equity is the value of the difference between your assets and your liabilities.
For example, you want to purchase a house for $100,000. You make a down payment of $30,000 and get a loan for $70,000.
Asset ($100,000) = Liabilities ($70,000) + Equity ($30,000)
If you make a payment of $10,000 toward the capital of the loan (let’s not consider interest right now) the equation would now look like this:
Asset ($100,000) = Liabilities ($60,000) + Equity ($40,000)
If you want to learn more about how this affects your business, you can buy D.I.Y. Bookkeeping on Amazon. Chapter 2 is completely dedicated to the Accounting Equation!
Buy D.I.Y. Bookkeeping on Amazon
Blessings,
Valerie Johnston