OWNER'S EQUITY ( OE )

Owner's Equity—along with liabilities—can be thought of as a source of the company's assets. Owner's equity is sometimes referred to as the book value of the company, because owner's equity is equal to the reported asset amounts minus the reported liability amounts.

Owner's equity may also be referred to as the residual of assets minus liabilities. These references make sense if you think of the basic accounting equation:

Assets   =   Liabilities   +   Owner's Equity

and just rearrange the terms:

Owner's Equity   =   Assets   –   Liabilities

"Owner's Equity" are the words used on the balance sheet when the company is a sole proprietorship. If the company is a corporation, the words Stockholders' Equity are used instead of Owner's Equity. An example of an owner's equity account is Mary Smith, Capital (where Mary Smith is the owner of the sole proprietorship). Examples of stockholders' equity accounts include:

• Common Stock
• Preferred Stock
• Paid-in Capital in Excess of Par Value
• Paid-in Capital from Treasury Stock
• Retained Earnings
• Etc.

Stockholders' equity accounts will normally have credit balances.

Contra owner's equity accounts are a category of owner equity accounts with debit balances. (A debit balance in an owner's equity account is contrary—or contra—to an owner's equity account's usual credit balance.) An example of a contra owner's equity account is Mary Smith, Drawing (where Mary Smith is the owner of the sole proprietorship). An example of a contra stockholders' equity account is Treasury Stock.