Owner's equity is equal to total assets minus total liabilities. Which expression defines owner's equity?

• A. Total Assets minus Total Liabilities
• B. Total Liabilities minus Total Assets
• C. Assets minus Liabilities
• D. Net Income

Answer: (C)

Owner's equity is what remains for the owner after all debts are paid. The fundamental relationship is the accounting equation: Assets = Liabilities + Owner's Equity. Rearranging gives Owner's Equity = Assets − Liabilities. So the expression that defines owner's equity is Assets minus Liabilities. For example, if a business has $500,000 in assets and $200,000 in liabilities, owner's equity is $300,000. The alternative of Liabilities minus Assets would be the opposite of equity and isn’t meaningful here, and Net income is a flow measure that affects equity over time via retained earnings but does not by itself define total owner's equity.