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The equity section is usually the part that is headed by the shareholder’s equity or the
owner’s equity on the balance sheet. The collective amount of equity on the balance sheet
represents the amount achieved after subtracting the total recorded liabilities from the total
recorded assets. The equity section shows the total joint investment in the company operations
by the firm investors. An enterprises equity can, however, be viewed as the net assets, that
represent the numerical difference between the enterprise assets/resources and its claims or
financial obligations (Wild, 2015).
Notably, the reporting of the interests of the owners on the equity section of the balance
sheet varies according to form of a business organization. For instance, a corporation’s equity
sections embodies three components; the retained earnings, the paid-in capital, and the treasury
stock. the retained earnings represent the income and dividends transactions.
Paid-in capital represents the money the shareholders invested in the company also
known as the contributed capital. It embodies the common stock, the additional paid-in capital,
and preferred stock. However, treasury stock represents the stock that a corporation repurchases
in order to retire or resale to new investors. The treasury stock can be evaluated by taking the
number of the shares issued and subtracting the number of outstanding shares. Usually, a
company repurchases its shares in order to prop up thei...