Offer your thoughts or opinion on the input financial query or topic using your financial background.

What is the difference between equity and assets?
Not to detract from the other answers at all (which are each excellent and useful in their own right), but here's my interpretation of the ideas: Equity is the answer to the question "Where is the value of the company coming from?"  This might include owner stakes, shareholder stock investments, or outside investments.  In the current moment, it can also be defined as "Equity = X + Current Income - Current Expenses" (I'll come back to X). This fits into the standard accounting model of "Assets - Liabilities = Value (Equity)", where Assets includes not only bank accounts, but also warehouse inventory, raw materials, etc.; Liabilities are debts, loans, shortfalls in inventory, etc.  Both are abstract categories, whereas Income and Expense are hard dollar amounts.  At the end of the year when the books balance, they should all equal out. Equity up until this point has been an abstract concept, and it's not an account in the traditional (gnucash) sense.  However, it's common practice for businesses to close the books once a year, and to consolidate outstanding balances.  When this happens, Equity ceases to be abstract and becomes a hard value: "How much is the company worth at this moment?", which has a definite, numeric value. When the books are opened fresh for a new business year, the Current Income and Current Expense amounts are zeroed out.  In this situation, in order for the big equation to equal out: Assets - Liabilities = X + Income - Expeneses the previous net value of the company must be accounted for.  This is where X comes in, the starting (previous year's) equity.  This allows the Assets and Liabilities to be non-zero, while the (current) Income and Expenses are both still zeroed out.  The account which represents X in gnucash is called "Equity", and encompasses not only initial investments, but also the net increase & decreases from previous years.  While the name would more accurately be called "Starting Equity", the only problem caused by the naming convention is the confusion of the concept Equity (X + Income - Expenses) with the account X, named "Equity".