Accounting equity is the net difference between total assets and total liabilities. In other words, it is the residual interest in assets after deducting all of the liabilities a company has. It gives an indication as to how much ownership a company has in its assets. Accounting equity is also referred to as shareholder’s equity or stockholder’s equity — depending on whether a company has shareholders or stockholders — and can be seen as a measure of a company’s financial strength. Knowing a company’s accounting equity can help investors better understand if a business is being managed responsibly and if it’s likely to stay stable and remain profitable.