We now know that companies have assets and liabilities.

What if there is a difference between the amount of assets and liabilities?

Take the following example:

Total assets are greater than total liabilities by 2,000,000. What does this consist of?

Equity is the entity’s overall worth. It is what is left in a company’s assets after you deduct the liabilities.

Assets – liabilities = equity

Equity consists of a number of components:

Share capital: the amount that the shareholders have invested in the company in return for shares

Retained earnings: earnings retained by the company

Simply put, you can say that equity is the value of the company.

Review the Statement of Financial Position for Bralirwa as attached here and  Identify equity for Bralirwa.