How to Calculate Stockholders' Equity for a Balance Sheet

By Motley Fool Staff – Updated Apr 30, 2025 at 4:50 PM EST

Key Points

Stockholders' equity equals assets minus liabilities, framing investor stake after creditors.
Paid-in capital includes monies from stock sales, often split into par value and excess amounts.
Retained earnings accumulate as undistributed profit, funding future investments or expansions.

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Stockholders' equity (aka "shareholders' equity") is the accounting value ("book value") of stockholders' interest in a company. Keep in mind, the shareholders' interest is a residual one: Creditors have first claim on a company's assets. You get a sense of that priority of claims in the following expression of the basic accounting equation:

Stockholders' Equity = Assets - Liabilities

But beyond the fact that it must match up with assets and liabilities, what goes into "stockholders' equity" on a balance sheet? Assuming a company has any operating history whatsoever, the two basic components of stockholders' equity are:

Paid-in capital
Retained earnings

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Transactions that involve stockholders are primarily the distribution of dividends and the sale or repurchase of the company's stock.

Excluding these transactions, the major source of change in a company's equity is retained earnings, which are a component of comprehensive income. However, there are other sources and thus, other comprehensive income.

Concretely, some examples of other comprehensive income are:

Revaluations of property, plant and equipment.
Changes in the fair value of securities categorized as available-for-sale.
Actuarial gains and losses related to the company's defined benefit pension plan.

Finally, just as the retained earnings figure on the balance sheet is a cumulative amount, the line item that relates to the other comprehensive income is "Accumulated other comprehensive income," which records the cumulative change to stockholders' equity from comprehensive income.

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