Equity is defined as the:

Equity is defined as the:

• A. Net worth of the business and the owner's share
• B. Current assets minus current liabilities
• C. Total revenue for the year
• D. The market value of assets

Answer: (A)

Equity is the owner's claim on the business after all debts are paid. It represents the net worth of the business—the assets minus the liabilities—and reflects the owner's share of that net worth. In practice, equity includes the owner's original investment plus any retained earnings, minus withdrawals or drawings. This measure changes with profits or losses, additional investments, and withdrawals, all of which alter the owners’ residual interest in the assets. This differs from other ideas like working capital (current assets minus current liabilities), which is about short-term liquidity; total revenue, which is income over a period; and market value of assets, which is about selling prices and may differ from the accounting values used to determine ownership.

Equity is the owner's claim on the business after all debts are paid. It represents the net worth of the business—the assets minus the liabilities—and reflects the owner's share of that net worth. In practice, equity includes the owner's original investment plus any retained earnings, minus withdrawals or drawings. This measure changes with profits or losses, additional investments, and withdrawals, all of which alter the owners’ residual interest in the assets.

This differs from other ideas like working capital (current assets minus current liabilities), which is about short-term liquidity; total revenue, which is income over a period; and market value of assets, which is about selling prices and may differ from the accounting values used to determine ownership.