Equity accounting is a method of accounting that records the changes in a company’s equity over time. It includes all transactions related to capital contributions, retained earnings, net income and dividends. Equity accounting helps investors and other stakeholders get a better understanding of how a company’s equity has evolved over time, providing them with valuable insight into the financial performance of the business. On a broader level, equity accounting serves as a window into the overall health of the business, highlighting any discrepancies or trends in the company’s financial management practices. It also helps ensure that companies comply with relevant regulatory requirements.
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