Equity represents the source of financing provided to the company by the owners.
Owners' Equity = Contributed Capital + Retained Earnings
Owner's equity is the owners' investments and the total earnings retained from the commencement of the company.
- Contributed capital is the amount invested in the business by the owners.
- Retained earnings are the company's undistributed earnings: accumulated earnings since inception less any losses, dividends, or transfers to contributed capital.
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