Owners Equity Example

Previous lesson: Basic Accounting Transactions 
Next lesson: Liability Example

Throughout this example and the ones that follow, we'll be using a business called George's Catering to illustrate each of the basic accounting transactions. We will specifically be looking at how each transaction affects the basic accounting equation.

Alright, so the first type of transaction we're going to be dealing with is the owners equity.

Let's use an example to see how this works.

George Burnham decides to start his own business, George’s Catering. 

Accounting equation for a business starting off

a) What is the first thing George is going to do? He’s going to invest in the business (he’s going to put some assets into the business). George decides to invest $15,000 of his personal funds into the business’s bank account. What happens to our equation? 

Owner's equity - investment in business

George’s Catering now consists of assets (bank) of $15,000.

A business is started by the owner. The owner invests his assets in the business so that the business will produce a profit for him.

The investment of assets in a business by the owner or owners is called capital. The owner’s stake in the business (the owner’s equity) increases when he invests assets in the business, because it is his assets. Notice that liabilities (debts to external parties) are unaffected. Their stake in the assets of the business does not change (still $0), because they had nothing to do with this. 

Assets & equity increasing

As you can see above, both sides of the equation are affected – one to increase the assets, and one to increase the owner’s equity. In other words, we are showing that the owner has put in more assets to the business, and these assets belong to him. 

Return from Owners Equity Example to Basic Transactions 

Return from Owners Equity Example to Home Page 

Previous lesson: Basic Accounting Transactions 
Next lesson: Liability Example

Enjoying this Website?
Help Support it with a Donation


Questions Relating to This Lesson

Click below to see questions and exercises on this same topic from other visitors to this page... (if there is no published solution to the question/exercise, then try and solve it yourself)

Statement of Owners Equity Exercise
Use the trial balance below to prepare the statement of changes in equity. Trial Balance Date Account Description Debits Credits Cash 25,000 …

Journal Entries, T-Accounts and Trial Balance Exercise
You are required to enter the following transactions for May 19-5. The accounts are then to be balanced off and a trial balance extracted as at 31 May …

General Journal Entry for
Beginning Operations

Q: I am trying to do a general journal entry for the following and was having trouble, could you help me with what accounts to debit and credit in this …

Earning Increases Owners Equity
Q: Please explain, with an example, how earnings increases owners equity? A: See the lesson called Define Income for how earnings or income increases …

Owner's Equity vs. Assets
Q: Is the owner's equity and assets always the same? A: Dona, owner's equity and assets are never the same. Please see my lessons on each of these …


Have your say about what you just read! Leave me a comment in the box below.

Advertise on ventoup.ru

Search this website:

All the lessons on this site and much, much more...

Available Now On

Get Your Degree!

Find schools and get information on the program that’s right for you.

Powered by

Subscribe to
The Student Accountant newsletter

Enter Your E-mail Address
Enter Your First Name (optional)

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you The Student Accountant.

Related pages

accounts payable creditorsexample p&l and balance sheetaccounting perpetual inventory systemfifo practice problemsdefine inventories in accountingaccounting fifo methoddifference between markup and gross profitjournal entry for salary paid to employeeshow to calculate total equity on a balance sheetincome statement debits and creditsrevenue minus expenses equalshow to calculate profit margin in accountingwhat is conversion cost in managerial accountingoutstanding rent journal entrymulti step income statmentlearn accountancyequation for markupscrapping goldfinancial accounting practice exercisesdifference between accounts payable and bills payableperpetual method of accounting for inventorywhat is the meaning of accounts payablevat tax calculator indiabank reconhow to calculate depreciation expense from accumulated depreciationaccounting 101 basicswhat does sundries mean in accountingundercast and overcast in accountingan accrued expense isschedule of accounts receivable definitionwhat is lifo & fifowhat is the meaning of bills payable and bills receivablesformula to remove vatin preparing closing entriesdebits increasebasic accounting knowledge testnotes payable debit or creditmeaning of debit in accountingprinciples of accounting ebookpreparing income statement from trial balancewhat is bbf meancash inflow statementjournal foliocheque record book formatsolved problems on balance sheetperpetual inventory record exampleaccounts payable vs accounts receivablerecording bad debtsvat receivable accountingtrading and p&l accounthow to compute markupprofit and loss statement format excelsamples of cash flow statementsaccounts receivable ledgerequity hindi meaningadjusting entries and closing entrieshow to compute total manufacturing costgeneral ledger explainedfifo stock saleseasy aptitude questionsantonym of debtorthe procedure of transferring journal entriescogs definewhen is the trial balance preparedtrial balance example problemsweighted average inventory costingwhat does accrued revenue meanposting journal entries to ledger accountstrial balance spreadsheetmanufacturing overhead cost applied to work in processwhat are the financial reporting cyclesdebit cash credit accounts receivableexamples of cash flows from financing activitiesbad debts and provision for doubtful debtsprime cost percentage formula