Equity
This term refers to the law of the country selected below.
Czech Republic
What is meant by the term ‘equity’?
Equity represents the funds provided to a company by its owners. Equity corresponds to what is known as ‘net worth’ or ‘net assets’, which is the portion of assets financed by equity.
Accounting or balance sheet equity represents the net value of a company’s assets. It is the difference between total assets and liabilities recorded in the balance sheet. If liabilities exceed assets, negative equity arises.
How is equity reported in the balance sheet?
The method of reporting equity in the balance sheet depends on the company’s legal form. In the case of capital companies, equity consists of share capital, capital reserves, reserves formed from profit and the profit or loss for the current financial year, and, where applicable, retained earnings or accumulated losses from previous years.
