Total Equity Calculator
This calculator helps you determine the total equity of a business or individual by applying the fundamental accounting equation: Assets = Liabilities + Equity.
Simply enter the total value of your assets and total liabilities, and the calculator will compute your total equity (Assets minus Liabilities). Ensure you use consistent currency units for both inputs.
Enter Financial Values
Understanding Total Equity & The Accounting Equation
What is Total Equity?
Total Equity represents the owner's stake or residual interest in the assets of an entity after deducting liabilities. It's essentially what's left for the owners if all assets were sold and all liabilities were paid off. For a company, this is often called Shareholder's Equity or Stockholder's Equity. For a sole proprietorship or partnership, it's called Owner's Equity or Partner's Equity.
The Accounting Equation
The foundation of double-entry bookkeeping, and this calculator, is the accounting equation:
Assets = Liabilities + Equity
This equation must always balance. It shows that a company's assets are funded by either borrowing (liabilities) or by the owners' investments and retained earnings (equity).
Calculating Equity
By rearranging the accounting equation, you can calculate Equity:
Equity = Assets - Liabilities
This calculator directly applies this rearranged formula.
Definitions
- Assets: Resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity (e.g., cash, buildings, equipment, inventory).
- Liabilities: Present obligations of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits (e.g., loans, accounts payable, salaries owed).
- Equity: The residual interest in the assets of the entity after deducting all its liabilities.
Real-Life Total Equity Examples
Click on an example to see the calculation:
Example 1: Small Business Startup
Scenario: A new business owner invests $10,000 cash. The business takes out a $5,000 loan.
1. Known Values: Total Assets = $15,000 (Cash $10k + Loan $5k received), Total Liabilities = $5,000 (The loan).
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $15,000 - $5,000
4. Result: Equity = $10,000
Conclusion: The total equity is $10,000, representing the owner's initial investment.
Example 2: Established Company
Scenario: An established company reports its financial position.
1. Known Values: Total Assets = $500,000, Total Liabilities = $300,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $500,000 - $300,000
4. Result: Equity = $200,000
Conclusion: The company's total equity (shareholders' stake) is $200,000.
Example 3: Homeowner's Equity (Simplified)
Scenario: A homeowner wants to estimate their equity in their house.
1. Known Values: Asset (House Value) = $400,000, Liability (Remaining Mortgage) = $250,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $400,000 - $250,000
4. Result: Equity = $150,000
Conclusion: The homeowner has $150,000 in home equity.
Example 4: Company with Negative Equity
Scenario: A company has struggled and its liabilities exceed its assets.
1. Known Values: Total Assets = $1,000,000, Total Liabilities = $1,200,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $1,000,000 - $1,200,000
4. Result: Equity = -$200,000
Conclusion: The company has negative equity of -$200,000, meaning liabilities are greater than assets.
Example 5: Personal Net Worth (Simplified)
Scenario: Calculating personal net worth (often equivalent to personal equity).
1. Known Values: Total Assets (Cash, Investments, Car Value etc.) = $75,000, Total Liabilities (Student Loans, Credit Card Debt etc.) = $30,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $75,000 - $30,000
4. Result: Equity = $45,000
Conclusion: The individual's net worth (equity) is $45,000.
Example 6: Company After Profitable Year
Scenario: A business shows its balance sheet after making profits.
1. Known Values: Total Assets = $850,000, Total Liabilities = $450,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $850,000 - $450,000
4. Result: Equity = $400,000
Conclusion: The company's equity has grown to $400,000, likely due to retained profits.
Example 7: Company After Owner Withdrawal
Scenario: A business owner withdraws funds from the business.
1. Known Values: Total Assets = $120,000, Total Liabilities = $40,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $120,000 - $40,000
4. Result: Equity = $80,000
Conclusion: The equity is $80,000 after accounting for the withdrawal (which reduced assets and equity).
Example 8: Non-Profit Organization's Net Assets
Scenario: A non-profit calculates its net assets (equivalent to equity).
1. Known Values: Total Assets = $250,000, Total Liabilities = $50,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $250,000 - $50,000
4. Result: Equity = $200,000
Conclusion: The non-profit's net assets (equity) are $200,000.
Example 9: Company Raising Equity
Scenario: A company receives a new equity investment from owners.
1. Known Values: Total Assets = $700,000, Total Liabilities = $400,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $700,000 - $400,000
4. Result: Equity = $300,000
Conclusion: The company's equity increased to $300,000 after the new investment (which increased assets and equity).
Example 10: Simple Balance Sheet Check
Scenario: Verifying the accounting equation holds true.
1. Known Values: Total Assets = $95,000, Total Liabilities = $35,000.
2. Formula: Equity = Assets - Liabilities
3. Calculation: Equity = $95,000 - $35,000
4. Result: Equity = $60,000
Conclusion: The equity is $60,000. If Assets ($95k) = Liabilities ($35k) + Equity ($60k), then $95k = $95k, confirming the equation balances.
Frequently Asked Questions about Total Equity
1. What is Total Equity?
Total Equity represents the owners' stake in a business or property. It's calculated as the total value of assets minus the total value of liabilities.
2. How is Total Equity calculated?
Using the fundamental accounting equation (Assets = Liabilities + Equity), Total Equity is calculated by rearranging the formula to: Equity = Assets - Liabilities.
3. What does it mean if Total Equity is positive?
A positive total equity means the value of the entity's assets is greater than the total amount it owes to others (liabilities). This indicates a healthy financial position from the owner's perspective.
4. What does it mean if Total Equity is negative?
Negative total equity (also called a deficit or insolvency) means the entity's total liabilities exceed its total assets. This indicates that if the entity sold all its assets, it would not have enough funds to pay off all its debts.
5. Where do I find the values for Total Assets and Total Liabilities?
These figures are found on a company's or individual's Balance Sheet, which is a financial statement summarizing assets, liabilities, and equity at a specific point in time.
6. Is Total Equity the same as Net Worth?
Yes, for individuals, "Net Worth" is the common term used to calculate personal financial standing (Total Personal Assets - Total Personal Liabilities), which is equivalent to the concept of Total Equity in a business context.
7. What affects Total Equity?
Equity changes over time due to several factors, primarily: Net income (increases equity), Net losses (decreases equity), Owner/investor contributions (increases equity), and Owner withdrawals or dividends paid (decreases equity).
8. What is the difference between Owner's Equity and Shareholder's Equity?
These terms are used depending on the business structure. "Owner's Equity" is typically used for sole proprietorships and partnerships, representing the owners' stake. "Shareholder's Equity" is used for corporations, representing the shareholders' stake.
9. Does this calculator include specific equity components like Retained Earnings or Stock?
No, this calculator provides the *total* equity figure based solely on the fundamental equation (Assets - Liabilities). The breakdown of equity into components like Retained Earnings, Common Stock, etc., is a separate accounting analysis that requires more detailed inputs than just total assets and liabilities.
10. Can I use this calculator for any currency?
Yes, you can use any currency ($, €, £, etc.) as long as you are consistent and use the same currency unit for both the Total Assets and Total Liabilities inputs. The result will be in that same currency unit.
