What constitutes equity?

Question

On the balance sheet under the heading Capital and reserves there are 2 subcategories 1)Share Capital and 2) Accumulated profit, does this mean that the total thereof is the shareholder's equity?

Answer 1

Yes your are correct. Accumulated profit is the accrued profits which the company has made & saved over the past years. It is a part of equity since the profits should go to the owners of a company (ie. share holders)

Answer 2

Yes you are correct both share capital & accumulated profits should be included in equity.