LIABILITY

EQUITY = TOTAL ASSETS - TOTAL LIABILITY


Lets understand what a Liability is ?

Liability in common parlance is when a person or an organisation that owes something to somebody.
Bank loan is a liability.

EQUITY = TOTAL ASSETS - TOTAL LIABILITY

Equity  is ownership of an asset
Asset is expenditure made to procure items to run the business.
Liability is a debt ( money owned to someone) and obligation towards repayment.

ASSETS

In our previous blog we understood equity as ownership of an asset.
or
In financial terms it is stated as Total assets - Total liabilities.

In this session we we understand what is an Asset and its types.

So we are now aware that goodwill of a company , trademarks , patents are the assets of the company as they are copyrights of the company. It is important to consider these assets also.
Mostly assets are classified according to the running of the business.
A manufacturing company's fixed assets could be machinery and buildings where as furniture, books could be an expenditure/expense where as for an educational institutes furniture and books are asset.

Understanding finance - basics - equity

We all have heard of equity , stock markets and shares. Lets understand what these terms really stand for ?  Please have a look at the video.

So Stock is an unitised value that represents ownership in the company. When any person buys a stock  he holds a voting right in the company. To justify when a company declares dividend from the portions of the profits a part of the dividend is credited into our accounts.