Components Of A Business Balance Sheet - Oregonians Credit Union (Page 2 of 2) in pdf

Components Of A Business Balance Sheet - Oregonians Credit Union Page 2

the assets less any debts with a pledge against those assets. This meaning is encapsulated in

the fundamental accounting equation, which defines the owner’s equity in the business as equal

to Assets minus Liabilities.

How does a business grow its Net Worth or Equity?

Businesses grow through building their Net Worth or Equity. A main goal of every business is to

see this growth. There are various ways a business can grow their Net Worth, most evident is to

decrease debt. This means a business will have more ownership in the businesses assets,

since less of the assets will be pledged to debt. The greatest contributor to the growth in a

business’s equity or net worth is retained earnings. The earnings of the business become equity

in the business in the form of retained earnings, which is listed as such under the equity section

of the Balance Sheet. Another way to grow a business’s net worth is through an outside capital

injection. This is most often money put into the business by ownership or by outside investors.

This normally shows as Capital under the equity section of the businesses Balance Sheet.

This represents a general overview and is not considered accounting advice. Please seek direction from

an accounting professional for detailed information regarding your business financials.

Components Of A Business Balance Sheet - Oregonians Credit Union Page 2