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Originally Posted by MrRational
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I suspect that the OP has not taken an accounting course. I haven't either.
Since the OP said "Owner's equity" rather than shareholders equity, don't we need to know whether we are dealing with an individual or a company?
In a personal financial statement, the value of real estate is an asset and any loans against it are a liability. That makes the equity in that real estate an asset.
Personal financial statement - Templates - Office.com
Subtract liabilities from assets and you get net worth, which you hope is a positive number!
It might be more helpful to just explain why the value of stock owned by shareholders is a liability to the company. It is not intuitively obvious.
OP may just be trying to learn how to read the reports one receives if he owns shares in a stock.
It is actually more helpful to look at it this way:
Assets = Liabilities + Shareholders Equity
Through the magic of elementary algebra:
Assets - Liabilities = Shareholders Equity
Take all the assets of the company (property, inventory, accounts receivable, etc.) then subtract its liabilities (what it owes to vendors, loan balances, etc.) and what you have left is what the company is worth. That is equivalent to the "net worth" on the personal financial statement. Since the stockholders own the company, that equity belongs to them, not the company itself. Therefore the value of stock is an asset to the shareholders but a liability in the company balance sheet.
Now, if the company actually owns shares of its own stock, then it does have a proportionate share of the shareholders equity.
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