Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

In a for-profit business, owners' equity is equivalent to:

Retained earnings only

Total revenues minus total expenses

Total assets minus total liabilities

Total cash on hand

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Verified step by step guidance

Understand the concept of owners' equity: In financial accounting, owners' equity represents the residual interest in the assets of the business after deducting liabilities. It is essentially what the owners 'own' in the business.

Recall the accounting equation: The fundamental accounting equation is Assets = Liabilities + Owners' Equity. Rearranging this equation gives Owners' Equity = Assets - Liabilities.

Analyze the options provided: Retained earnings are a component of owners' equity but not equivalent to it. Total revenues minus total expenses represent net income, which contributes to retained earnings but is not the same as owners' equity. Total cash on hand is a part of assets but does not represent owners' equity.

Identify the correct answer: Based on the accounting equation, owners' equity is equivalent to Total Assets minus Total Liabilities.

Apply this understanding to real-world scenarios: When analyzing a balance sheet, you can calculate owners' equity by subtracting total liabilities from total assets. This helps assess the financial health of a business.