How to Calculate Equity on an Accounting Balance

by Christopher Carter

You can calculate a company's equity with nothing more than a calculator and the company's balance sheet. Knowledge of the accounting equation, which states assets equal liabilities plus stockholders’ equity, can help calculate a company’s equity. Assets are resources controlled by a company that hold future economic value to the business. A liability exists as an obligation on the company’s asset; they are debts incurred that the company must pay to maintain good credit standing. Stockholders’ equity indicates the amount owners have invested in the business.

Compute the company’s total assets. Add current assets such as accounts receivable, inventory and cash. Calculate the company’s total long-term assets. Long-term assets include items such as copyrights, patents, land, buildings and equipment. Add the sum of long-term assets and current assets. For example, a company with long-term assets of $150,000 and current assets of $75,000 has total assets of $225,000.

Add the company’s total liabilities. Tally the company’s current liabilities, such as accounts payable, unearned revenue, taxes payable and notes receivable that are due within one year. Calculate the company’s total long-term liabilities. Long-term liabilities include notes payable in over one year, leases and mortgages payable. Add current liabilities with long-term liabilities. The total yields the company’s total liabilities. For instance, a company with current liabilities totaling $80,000 and long-term liabilities of $50,000 has total liabilities of $130,000.

Subtract total liabilities from total assets to determine stockholders’ equity. Assuming a company has total liabilities equal to $130,000, and total assets of $225,000, the business has $95,000 in total equity.

About the Author

Christopher Carter loves writing business, health and sports articles. He enjoys finding ways to communicate important information in a meaningful way to others. Carter earned his Bachelor of Science in accounting from Eastern Illinois University.