A business example
At a reporting date, a simplified business has ₹6 lakh of assets and owes ₹2 lakh to others.
Assets
Cash, stock and other recorded assets total ₹6 lakh.
Liabilities
Amounts owed total ₹2 lakh.
Equity
₹6 lakh − ₹2 lakh = ₹4 lakh of residual equity.
What this shows
The statement balances at that date. The ₹4 lakh equity figure is neither a promise of sale proceeds nor an available cash balance.
What it is often confused with
It is a snapshot at a date, unlike a profit and loss statement covering a period.
What to look at in your business
Check the reporting date, comparative figures and supporting schedules.
Context and further reading
This entry explains the business term. The related guide below provides the next layer of context; any applicable legal test depends on the transaction and relevant period.
Kosha.Services · Updated 2 October 2026