How Do You Calculate Owner’S Equity?
• Calculate the sum total of your business assets. These include tangible goods owned by the business–such as office furniture, business machinery, inventory and real estate–as well as intangible assets. Examples of intangible business assets include: Copyrights or trademarks, favorable location, community awareness, long-term contracts and people. • Remember to calculate the value of tangible business assets using their current worth, not their original purchase cost. Office furniture, for example, may decrease in value with age and use; real estate, if owned by your business, may appreciate or depreciate in value. • Calculate the total of your business liabilities. Subtract the total of your business liabilities from yours business assets. If there’s anything left, this amount is the equity of the business or the owner’s equity. Since the owner must absorb the impact of business losses, the business may have liability — debt — instead of equity to pass on to the owner or owners.
