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1. Is it true that total equity belongs to the shareholders since they provided the money to run the business which includes share capital, share premium, retained earnings, revaluation reserves and other equity items?
2. According to the accounting equation our total equity is assets minus liabilities but it is also equal to net assets. This means the total equity amount is the same as the net assets amount although they both mean different?
3. Is it true that total equity is the book value of a company which means this is the minimum worth of the business because it is the value of its net assets that the business own?
1. The equity is money provided by the shareholders. (Other money to run the business may. be provided from long-term borrowings, but this is not equity).
2. Yes – the total equity is always equal to the net assets for the reasons explained in my free lectures.
3. It is the book value, but this is not necessarily the minimum worth of the business because the actual values of the non-current assets may be more or less than the book values.
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