Owner’s Equity: Backbone of any Business

In the present business and accounting world, money plays a crucial role. Money helps in day-to-day operations of a business. Money is not only used to maintain a strong inventory or sell services and goods but also it helps the company to handle regulation expenses pertaining to employees and machinery.

In a business, owner’s equity is calculated by subtracting the total assets amount with the total liability amount. Today, we will discuss about this topic in brief while covering the importance of hiring an accountant.

The owner’s equity is referred to as sole proprietor or two or three people who remains as partner in the business. If a business is a public company, then it will be owned by thousands of stockholders. It is referred as stockholder’s equity. There are some important terms in accounts related to owner’s equity. Some are related with unincorporated and some with corporation firms.

Retained earnings: Retained earnings are calculated from the income statement. It helps to analyze the status of the business whether it is making profit or loss. It is usually calculated at the end of year and accountants and business managers compare with the previous years to find out the differences. When tracking the loss or profit of a business, retained earnings serves as the major provider to boost the owner’s equity. It helps to figure whether the business has achieved the targeted profit or not. If it has achieved, the business analyst would find in what ways and terms it has managed to achieve.

Capital: The capital amount includes all assets and cash, one or multiple owners put in to the business. If the capital account reflects growth, it ends up improving the owner’s equity.

Drawing: The drawings account is the exact opposite of the owner’s capital account. The money withdrawals that the business owners make from their business are called as drawings. It reduces the owner’s equity.

The owner’s equity is important in any business. There will be no business without the owner’s equity in the world. The accountants would have a challenging time to calculate and keep track of all business transactions. Some large businesses have large transactions to carry out and they hire accountants to perform the task. The experienced accountant gives reasonable advice and recommendations for the business to grow.

How to select an accountant for your business?

When considering an accountant to manage your accounting operation, you need to select your accountant based upon your requirements.

Before approaching an accounting company, first make sure what is your requirement and do you really need a professional bookkeeping assistance. A professional would take complete care of your business planning, personal and company accounts, accounting, payroll, inventory, tax advice, etc.

Make sure to select a company that provides all services you require. One of the best ways to get in touch with the best accountant is through personal referrals, testimonials and client feedback. The client would have dealt with the company and they know their level of service, experience, and company policies. So, ensure to ask your associates, friends or relatives who are in similar business process.
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