What is included in equity on a balance sheet?

Equity on a balance sheet represents the owner's residual interest in the assets of an entity after deducting liabilities. It primarily consists of the funds contributed by the owners or shareholders, which is referred to as contributed capital. This includes amounts invested by shareholders in exchange for shares of common or preferred stock.

Contributed capital reflects the actual money that shareholders have put into the company, providing essential funding for operations and growth. In addition to contributed capital, equity may also include retained earnings, which are the accumulated profits that have not been distributed as dividends. However, the key aspect of equity is that it showcases the investment made by the owners in the firm.

The other options pertain to different aspects of the balance sheet. Liabilities represent what the company owes, and assets are what the company owns, neither of which contribute to the equity section. A net loss affects retained earnings but does not constitute equity by itself; rather, it reduces equity as it reflects negative performance outcomes. Thus, contributed capital stands out as the primary element defining equity on a balance sheet.