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I have few questions…
1. Is it true that net assets is equal to the total assets less total liabilities.
2. Equity is the total amount owing to the shareholders in a limited company which contains share capital, share premium, retained earnings, revaluation reserves and if there is literally any, please can you name them?
3. The total equity is always equal to the total net assets.
4. Are net assets and total equity both means the same thing?
5. Is it true that the equity plus the long term liabilities that provide the finance for the business. This in invested in the assets used to run the business.
1. Yes.
2. The other one you might see is called other components of equity.
3. Yes, think back to the accounting equation
4. No. Net assets is asset less liabilities, so looking at what the company owns/controls less what it owes. Equity is the amounts owed to the owners of the business.
5. Yes. The equity plus long-term debt is how the business has raised finance to run the company. This finance is then used to acquire PPE and inventory to be used within the business to generate profit.
Sorry to ask again but I am a slight confused here. Please clarify that isn’t the total equity and net assets are amount that we owed to the shareholders because they are seemingly the same amount!
1. When you say that net assets is total assets – total liabilities then we will end up having total equity which you also said is equal to net assets like (Net assets = Total assets – Total liabilities = Total equity). Is that correct?
2. Let me ask you with example:
Total assets = $100,000
Total liabilities = $40,000
Total equity = $60,000According to accounting equation the Total equity is equals to Net assets of $60000. Is that correct too?
3. Let me ask you with Total equity breakdown as well.
Share capital = 15,000
Share premium = 5000
Retained earnings = 30,000
Other reserves = 10,000
Total equity = $60,000The amount of equity ($60,000) is owed to shareholders because it is basically their money BUT on the other hand, the net assets is also ($60,000) then what is the basic difference?
Although Thanks again for your utmost help. Good day!
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