How to determine equity on the balance sheet

The amount of equity capital you can easily determine the balance. It includes authorized, incremental and reserve capital and retained earnings and funds a special purpose. All these values you will find in the third section of the balance sheet "Capital and reserves".

Let us consider the formation of each article in this section. Authorized capital (line 410 of the balance sheet) represents the amount invested by the shareholders in the company. It is stipulated in the constituent documents of the organization. To change the authorised capital may only after a corresponding entry in the founding documents. To equity should include a line 411 "Own shares redeemed at shareholders" if the organization bought back from shareholders securities.

Added capital (line 420) is part of enterprise's equity capital, which includes amounts contributed by the founders in excess of the authorised capital. Remember that the additional capital can impact the amount of share premium of joint stock companies, the amount of the revaluation of non-current assets of the organization, and part of the undistributed profits remaining at its disposal.

Reserve capital (line 430) is part of the equity that is allocated from the profits of the enterprise to cover potential losses. Note that the capital reserve is divided into reserves formed in accordance with the legislation (line 431) and the reserves formed in compliance with constituent documents (line 432).

Remember that the main source of the accumulation of property of the enterprise is retained profit (line 470). It is equal to the difference between the financial result for the reporting period and the amount of taxes and other payments made from profit. It also includes the remains of the special purpose funds created in the organization which are not shown in the balance sheet as a separate line.