Differences between equity and equity


Net worth is one of the three great assets and liabilities of a company, together with the assets and liabilities. It is defined as the residual interest in the assets after deducting all liabilities. In other words, they are the own resources of a company to finance its assets, also known as non-current liabilities, since there is no obligation of the company with third parties or have a maturity.

differences-between-equity-and-equityHowever, in many cases it is often confused equity of a company with equity when, in fact, they are slightly different concepts. What is the difference between them?

The equity of a company is formed by the contributions of members to its capital plus undistributed profits that are part of reserves and adjustments for changes in value. The net worth is a somewhat broader concept, since, in addition to equity, includes other items such as grants, donations and legacies.

The difference between the two is that while all these resources are considered non-current liabilities and therefore there is no obligation to return, contributions come from different actors. So while equity are obtained within the company, the remaining elements of the net assets are issued by third parties outside it. For example, subsidies are granted by the various public administrations and donations and bequests by private companies or individuals.

However, from an accounting point of view, both elements usually have the same consideration, in the sense that they serve for the establishment of the company or its investment in non – current assets, such as a warehouse or a computer, until impute in the profit and loss account.

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Richard Anderson


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