Talking Cents

The different between equity and capital explained by our small business accountants in Sydney

Did you know that equity and capital are terms used to describe ownership for a business or the monetary value that a person has invested in said company?

Being able to tell the difference between the equity and capital invested into your business is crucial when financial reporting is taking place. Our small business accountants in Sydney know that both terms can vary according the context they are used in, which is why we will tell you the difference between the two.

Below is a clear overview by our business accountants that outlines their differences:

• Equity – this represents the amount of money that can be claimed by shareholders who have invested into your business (if you have any), once your liabilities have been deducted from your assets. It is important to ensure that your liabilities do not exceed your assets as it will result in a negative equity
• Capital – refers to the amount of money that that is contributed to the business by the owners and investors. This allows for your business to then purchase more assets the improve the overall functionality and efficiency for running the business

If you are having some troubles with deciphering the difference between the two then it might be time to get in contact with our business accountants in Sydney.

Feel free to send us an enquiry here if you have any questions or you can check out our full range of services here!