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Classifying Balance Sheet Accounts

6 May, 2015 - 17:39

Owner's equity is the portion that remains after liabilities are subtracted from assets. For a sole proprietorship or partnership, capital represents the owner's equity. For a corporation, capital stock is the investment made by stockholders. Retained earnings represent net income that a corporation retains. Dividends are earnings of a corporation that are distributed to shareholders. Drawings represent assets taken out by owners of proprietorships or partnerships. Drawings and dividends reduce owner's equity.