Which of the following is a correct name for equity in a corporation?

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Multiple Choice

Which of the following is a correct name for equity in a corporation?

Equity represents the owners’ claim on the business, and in a corporation the owners are stockholders. That’s why the equity section of the corporate balance sheet is named stockholders’ equity. This umbrella includes the amounts from stock that was issued, additional paid-in capital, retained earnings (profits kept in the business), and other comprehensive income. Owner’s equity is used for sole proprietorships, where the owner and the business are one, while partner’s equity applies to partnerships with multiple owners. Net assets is a term you’ll see in non-profit or government accounting to describe the residual assets after liabilities, not the standard corporate equity naming. So the correct term for a corporation’s equity is stockholders’ equity.

Equity represents the owners’ claim on the business, and in a corporation the owners are stockholders. That’s why the equity section of the corporate balance sheet is named stockholders’ equity. This umbrella includes the amounts from stock that was issued, additional paid-in capital, retained earnings (profits kept in the business), and other comprehensive income.

Owner’s equity is used for sole proprietorships, where the owner and the business are one, while partner’s equity applies to partnerships with multiple owners. Net assets is a term you’ll see in non-profit or government accounting to describe the residual assets after liabilities, not the standard corporate equity naming. So the correct term for a corporation’s equity is stockholders’ equity.

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