The liabilities of a business are its debts to others.
Liabilities are defined as probable future sacrifices of economics benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as the result of past transactions or events.
Liabilities are things owed by the business and they falls under two headings:
Long Term eg Bank Loan and Mortgage > one year to repay
Current eg Overdraft and Creditor < one year to repay
Owner’s equity is defined as “the residual interest in the assets of an entity that remains after deducting its liabilities. Also called as net assets.
Its comprises that funds invested in the business by the owner plus any profits retained for use in the business less any share of profits paid out of the business to the owner. There are five components such as Opening Capital, Additional Capital, Drawings, Net Profit/Net Loss and Closing Capital.
E.G Capital is money or any other asset used by proprietor to start or run a business