Definition of Stockholders' Equity

Stockholders’ equity is the owners’ claim in the net assets of the business. In other words, the residual of total assets after paying off all the liabilities of the business is called the stockholders’ equity. The accounting equation represents the total assets on one side and another side of the equation shows where these assets came from.

The stockholders’ equity can be calculated using the accounting equation as follows.

Assets = Liabilities + Stockholders’ equity

Stockholders’ Equity = Assets – Liabilities

Stockholders’ equity includes Ordinary Share capital, share premium, additional paid-up capital, preferred share capital, other reserves and retained earnings.