A company has assets of $544,485, liabilities of $314,694 and retained earnings of $58,369.

How much is the total equity?

Question

A company has assets of $544,485, liabilities of $314,694 and retained earnings of $58,369.

How much is the total equity?

BlackTom AI · Accepted Answer

Begin by identifying what the question is asking: total equity.
First, recall the basic accounting relationship: Assets = Liabilities + Equity. Therefore, Equity = Assets − Liabilities.
Next, substitute the given numbers: Assets = 544,485 and Liabilities = 314,694.
Compute the difference: 544,485 − 314,694 = 229,791.
At this point, you might wonder how Retained Earnings fits in. Retained earnings are a component of Equity, not a separate addition to Equity in this calculation. The formula Equity = Assets − Liabilities already accounts for all equity components (including retained earnings) as part of the total Equity figure.
A common alternative, mistaken approach would be to add Retained Earnings to Liabilities or to try to sum Liabilities and Retained Earnings separately and then subtract from Assets. For example, 314,694 + 58,369 = 373,063; applying this to Assets would yield 544,485 − 373,063 = 171,422, which treats retained earnings as a liability rather than as part of Equity. That misrepresents how equity is defined on the balance sheet.
Another tempting but incorrect approach is to take Assets minus (Liabilities plus Retained Earnings) and expect that to be the Total Equity; this conflates the components of Equity with Liabilities.
Therefore, by correctly applying Equity = Assets − Liabilities and recognizing Retained Earnings as a component of Equity, the calculation yields 229,791. The inclusion of Retained Earnings in the given data confirms it is part of the Equity total rather than an additional adjustment to liabilities.

A company has assets of $544,485, liabilities of $314,694 and retained earnings of $58,369. How much is the total equity?

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