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Chapter 2. Accounting 101 > Troubleshooting

Troubleshooting

Equity and Actual Net Worth

When I subtract total liabilities from total assets, I arrive at what is supposed to be the net worth of my company. However, I know my company is worth more than that amount. Why is there such a disparity between the equity in my accounting records and the true equity of my company?

One reason that true equity doesn’t always appear in your accounting records is that the equity that appears on your company accounting records and financial statements represents a figure calculated without regard to the market value of certain assets. You might own marketable securities or other assets that have appreciated in value, but those assets are listed on your financial statements at their original cost.


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