TOPIC

Determining the networth of a business

A business is an organisation whose main aim is to make a profit. It has assets, liabilities and capital. An asset are the items owned by the business. A liability is what the business owes to outsiders. Capital is a special kind of liability because it is what the business owes the owner of the business. It is also known as owners equity. It is what the owner of the business has invested in the business from his personal property in terms of money or an asset. Total assets is equal to total liabilities plus capital. This is known as the bookkeeping equation or balance sheet equation.