Owner’s equity

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The owner provides money and/or other assets to start a business. This is called owner's equity.

  • Capital: Money/assets the owner provides to the business.
  • Drawings:What the owner takes from the business for personal use.

It is possible for the owner to take money or goods from the business for his own use. As said, these are called drawings. The capital increases the owner's equity and the drawings decrease the owner's equity.

If the owner did not provide all the money or assets, then he needs to get money or finances from another source. These sources could include borrowing and buying on credit