Which term on a balance sheet represents the owner's claim on the business after liabilities?

• A. Net worth
• B. Assets
• C. Current liabilities
• D. Income statement

Answer: (A)

Residual claim after liabilities is the owner's equity, often called net worth. On the balance sheet, assets minus liabilities equals the owner's equity, which is the portion of the business owned by the owner after debts are paid. That residual interest represents the owner's actual claim on the company’s assets. For example, with 100 in assets and 60 in liabilities, the owner's equity (net worth) is 40. The other terms don’t fit: assets are the resources the business owns, current liabilities are the debts due soon, and the income statement is a separate report of revenues and expenses, not a balance sheet item.