Owners’ equity = assets – liabilities

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Owners’ equity = assets – liabilities

The owners’ equity of a corporation is called stockholders’ equity, so the accounting equation becomes:

Assets = liabilities + stockholders’ equity

Stockholders’ equity has two parts: contributed capital and retained earnings:

Stockholders’ equity = contributed capital + retained earnings.

Contributed capital is the amount invested in the business by the stockholders. Retained earnings represent the equity of stockholders generated from the income –producing activity of the business and kept for use in the business.

 Simply stated, revenues and expenses are increases and decreases in stockholders equity that result from operating a business. Generally speaking, a company is successful if its revenues exceed its expenses. When revenues exceed expenses, the difference is called net income; when expenses exceed revenues, the difference is called net loss.Net income – or net loss – is of course, “the bottom line”, and discloses whether or not a company has been profitable for a given period. Dividends are distributions to stockholders of assets (usually cash) generated by past earning. It is important not to confuse expenses and dividends, both of which reduce retained earnings.

Notes

a legal background - юридическое образование

extend far beyond - выходить далеко за рамки

entered into - в которых участвуют

adjust relationships with - строить отношения с…

as they fall due - когда придёт срок (погашения)

other than - помимо, кроме

put to use - использовать, употребить

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