# Net Worth

## What is Net Worth?

Net worth can refer to an individual or to a business or company and is simply the difference between the assets and liabilities. The formula for calculating net-worth is as follows:

Net worth = Assets – Liabilities

For a business net worth is usually calculated on the assets and liabilities shown in the balance sheet. This means that it reflects the carrying value of the assets and liabilities and not necessarily their market value.

Since net-worth is based on the balance sheet of the business, it follows from the accounting equation, that it is the same as the equity or the net assets of the business. It should be noted that, in the event that the liabilities are greater than the assets of the business, the net worth can be a negative figure.

## Individual

For an individual, the term net-worth generally refers to the market value of their assets and liabilities and as such represents the net wealth of the individual. So for example, if an individual has assets of 300,000 including a house at market value, and has liabilities of 80,000 including a mortgage on the property, then the individuals net wealth would be shown as 220,000.

For further information see the Wikipedia definition.

## Learn a new bookkeeping term

Random bookkeeping terms for you to discover.

## Link to this Net-Worth Definition

Click in the box to copy and paste this definition link to your site.

Net Worth August 1st, 2016

## Related pages

perpetuity annuity formuladividend income journal entrygoodwill journal entryformat for petty cash bookfuture value of a lump sum formulajournal bookkeepingmarkup calculatorwhere are adjusting entries recordedformula of total variable costvertical analysis calculatorweighted average contribution margin per unitexcel present value of an annuityaccrued salaries payabletemplate for a voucherclosing entries for inventorywhat is cogs in accountingimpairment intangible assetsdistinguish between trial balance and balance sheetaccounts payable period formulaannuity due chartentry of prepaid expenseswhat is consumables in accountingwhat is the formula for predetermined overhead ratecarriage inwards and outwardsdouble entry prepaymentprepare a contribution format income statementaccount receivable subsidiary ledgerproperty plant and equipment journal entriesnetcteditstockholders equity formula balance sheetmarketable securities in accountingpmt function calculatorsales transaction journal entryamortizing bondscontra entry definitioncash accounting vs accrualwhat is the periodicity assumptioncontrolaccountgeneral ledger spreadsheetcredit voucher templateobsolete and slow moving inventory definitioncapital gearing meaningcash receipt journal entrydeclining balance ratewhat is a trade discount in accountingmarkup margin calculatormarketable securities accounting10 steps in accounting cyclebasic accounting bookkeepinghow to calculate cumulative cash flowfifo method calculationfob destination meaningbrs statement formatprovision for doubtful debts ifrsexamples of indirect labor costsinventory turnover is calculated by dividinglabor rate varianceunearned revenue a liabilityyear end accounting entriesjurnal inventoryassets turnover ratio analysiscalculate total variable cost per unitdeferred revenue adjustmentexamples of leverage ratiosexamples of owner's equityturnover calculatornet profit turnover ratio formulaallowance for doubtful debts in balance sheethow to calculate cost from selling price and marginhow to record closing entriesformula for growing annuity