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0:00
Hello. Janis Weber
here, and I am covering
some introductory financial
accounting topics
at a very overview level.
So in this session,
I'll be covering
the equity section of
the balance sheet,
which is actually a section
that is a little
difficult to understand
because it's hard to tell
what is represented on that
because individuals who aren't
experienced with accounting,
don't really recognize
the words that
they're seeing in
the equity section.
I'm going to try to clear
some of that confusion,
and hopefully you will
understand more about
the financial statements as a
whole and the balance sheet,
and then that equity
section, in particular.
0:42
I just wanted to
let you know what
my background
includes, and that is,
I have had a two career
experience with accounting.
My first career was as a
CPA in public practice,
and then I converted
to become an educator
at a public university.
In both of these cases,
I have had a good
experience with accounting,
and I'm hoping I can spark
some interest in
you by giving you
some understanding
of these concepts.
1:11
Equity. What is it?
Equity is the net
worth of the company.
It's the amount that
is owed to the owners.
This just means it is the
balance that is left over
after all the liabilities
have been satisfied.
It follows the accounting
equation directly.
Just as a reminder, the
accounting equation
is assets, the total
value of the assets
or the total book value of
the assets, so I should say,
equals the book value
of the liabilities
plus the value of the equity.
Whenever you say assets equals
liabilities plus equity,
what you're saying is this
total balance of assets
is equivalent to the total
that we owe to the creditors
and the total that we
owe to the owners.
If you rearrange the
accounting equation,
you could say assets minus
liabilities equals equity.
What we're saying is
once the liabilities to
the outside creditors
have been satisfied,
then everything that would
remain of the assets
would belong to those
shareholders who are the owners.
