By rearranging the accounting equation you can see that Owner’s Equity is made up of Assets and Liabilities.
Owner’s Equity = Total Assets less Total Liabilities
Owner’s Equity can also be expressed as:
Owner’s Equity = Capital invested by owner + Profits (Losses) to date
(also known as ‘Retained Earnings ’)
Rearranging the equation again, therefore:
Total Assets - Total Liabilities = Capital + Retained Earnings