Equity
Equity is the part of the assets that belongs to the owners after all liabilities are deducted; in corporations it breaks down into share or nominal capital, statutory and voluntary reserves, and the result.
Definition
It is the buffer against losses and therefore the figure banks look at first. If it falls below half of the capital and statutory reserves there is a capital loss and the board must act; if it is negative, the company is over-indebted.
In a sole proprietorship the boundary is fluid: private withdrawals and contributions change equity directly without passing through the income statement. A private account is therefore needed to keep those movements visible.
The wording
Equity must be presented and structured according to the legal form of the undertaking.
Where to read it
What the software must be able to do
Check the structure of equity on the balance sheet and, for corporations, the representation of profit appropriation. For sole proprietorships the private account is the check.
Checked Aug 2026
More terms under Bookkeeping and retention: Accrual principle Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Contribution margin Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Hidden reserves Income statement Inventory count Journal Journal entry Liabilities Liquidity Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Prepaid expenses Provision Record-keeping ordinance Reserves Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules