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Equity

Equity is essentially how much the company is worth. It's the value of 100% stake in the company.

There are two types of equity accounts you need to know:

Common Stock

Common stock represents stockholder ownership in the company through the purchase of stock.

AccountIn relation to a lemonade stand...
Common StockBusiness has been booming, so you issue 100 shares of stock to raise more capital for expansion.

Retained earnings

Retained earnings represents the net income kept by a company after they have paid their stockholders dividends

AccountIn relation to a lemonade stand...
Retained EarningsYou've raised $10,000 in net income this semester, and issued $1,000 in dividends out to shareholders.