The amounts of funds that have been provided by owners of a business (firm) as well as their claims on its assets. The owners have a residual interest in the firm’s assets, i.e., they have a claim on all its assets after meeting creditors’ claims. Shareholders’ equity includes the amounts invested by shareholders for their ownership interests and retained earnings.
On the statement of financial position (balance sheet), equity appears on the liability side, enlisting many items including: share capital, contributed capital, risk reserves relating to equity holders, accumulated exchange rate differences and retained earnings. The total amount is called “equity attributable to shareholders” (total equity).
Comments