OE = A – L

Transcript:

E = A – L
OE = A – L
SE = A – L

Hello!

Today we are going to try to solve a “mystery” equation. If you don’t know what “E = A – L”, “OE = A – L” or “SE = A – L” mean, then this Peter’s Pills is for you!

Let me start by telling you that E stands for Equity, while A stands for Assets and L stands for Liabilities. Does that help?

In law:

• As you many know, in law equity (quello che è equo; quello che giusto) is a set of legal principles and remedies aimed at ensuring fairness and justice (volti a garantire correttezza e giustizia), particularly when common law rules could result in injustice. It acts as a supplement and potential override to strict legal rules (deroga alle rigide norme) in inadequate or unfair (inique) situations;
• You may also remember, in law liability (responsabilità) refers to the legal responsibility or obligation for something, particularly when actions or omissions cause harm (ledono) or damage (provocano danni – N.B. damage is uncountable in English). This often requires financial compensation or other corrective actions.

But do these definitions help us to solve the equation? Sadly not.

To solve the equation we need to look at the definitions from an accounting or finance perspective.

In accounting and finance:

• As we know, an asset (attivo, bene, avere) is something valuable that someone owns or controls and expects to benefit from financially in the future;
• In accounting and finance terms a liability (passività, dare) is something a company or individual owes (deve ha verso) to others, representing a future economic burden (onere, peso);
• On the other hand, in this field equity (patrimonio, capitale) is the value remaining for the owners or shareholders after all debts are paid off (saldati) from the company’s assets. It signifies the net value of the business from the owners’ or shareholder’s perspective.

As you can see, in this context the meanings of liability and equity have changed radically.

So, the fundamental accounting equation means this:

E = A – L means Equity equals Assets minus Liabilities
OE = A – L means Owners’ Equity equals Assets minus Liabilities
SE = A – L means Shareholders’ Equity equals Assets minus Liabilities

Context is everything here. Please remember that when people are speaking about financial statements (bilancio) or the value of a company, the meanings of equity and liability are completely different from the meanings in law.

Thank you very much and see you next time for more Peter’s Pills to improve your Legal English!

Read more about the fundamental accounting equation here: “Accounting equation“.

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Legal English – Sommario delle Lezioni

• Legal English – Peter’s Pills – Lesson 94 – OE = A – L

• Legal English – Peter’s Pills – Lesson 93 – False Friends – Part Two

• Legal English – Peter’s Pills – Lesson 92 – False Friends

• Legal English – Peter’s Pills – Lesson 91 – Fee Estimate Headings – Part 5 – Unregistered deeds and formalities

• Legal English – Peter’s Pills – Lesson 90 – Fee Estimate Headings – Part 4 – Other

• Legal English – Peter’s Pills – Lesson 89 – Fee Estimate Headings – Part 3 – Mortis Causa

• Legal English – Peter’s Pills – Lesson 88 – Fee Estimate Headings – Part 2 – Corporate

• Legal English – Peter’s Pills – Lesson 87 – Fee Estimate Headings – Part 1 – Real Estate Deeds

• Legal English – Peter’s Pills – Lesson 86 – Traded, listed and quoted

• Legal English – Peter’s Pills – Lesson 85 – Sole Traders and Partnerships

• Legal English – Peter’s Pills – Lesson 84 – General English vs Legal English 2

• Legal English – Peter’s Pills – Lesson 83 – General English vs Legal English 1

• Legal English – Peter’s Pills – Lesson 82 – Next of kin

• Legal English – Peter’s Pills – Lesson 81 – File, Register and Enrol

• Legal English – Peter’s Pills – Lesson 80 – Securities

• Legal English – Peter’s Pills – Lesson 79 – Legatee vs Devisee

• Legal English – Peter’s Pills – Lesson 78 – Adverse possession

• Legal English – Peter’s Pills – Lesson 77 – Probate

• Legal English – Peter’s Pills – Lesson 76 – File a deed vs Record a deed

• Legal English – Peter’s Pills – Lesson 75 – Allotting shares, Issuing shares and Placing shares

• Legal English – Peter’s Pills – Lesson 74 – Personal Representatives

• Legal English – Peter’s Pills – Lesson 73 – Essential Elements of a Contract

• Legal English – Peter’s Pills – Lesson 72 – Types of cases: Cornerstone and Milestone cases

• Legal English – Peter’s Pills – Lesson 71 – Types of cases: Landmark cases

• Legal English – Peter’s Pills – Lesson 70 – Specific performance

• Legal English – Peter’s Pills – Lesson 69 – Wills

• Legal English – Peter’s Pills – Lesson 68 – Notice

• Legal English – Peter’s Pills – Lesson 67 – Bonds vs Debentures

• Legal English – Peter’s Pills – Lesson 66 – Person Persons People

• Legal English – Peter’s Pills – Lesson 65 – Financial Reporting Words

• Legal English – Peter’s Pills – Lesson 64 – Representations and Warranties

• Legal English – Peter’s Pills – Lesson 63 – Machine translations

• Legal English – Peter’s Pills – Lesson 62 – Legal Timelines

• Legal English – Peter’s Pills – Lesson 61 – Liens

• Legal English – Peter’s Pills – Lesson 60 – Test your Legal English

• Legal English – Peter’s Pills – Lesson 59 – Appurtenent vs In gross

• Legal English – Peter’s Pills – Lesson 58 – Building societies and Banks

• Legal English – Peter’s Pills – Lesson 57 – Valid, void and voidable contracts

• Legal English – Peter’s Pills – Lesson 56 – Rescission

• Legal English – Peter’s Pills – Lesson 55 – Golden expressions

• Legal English – Peter’s Pills – Lesson 54 – Pre-emption right vs Right of first refusal

• Legal English – Peter’s Pills – Lesson 53 – What do we mean by “agent” of a company?

• Legal English – Peter’s Pills – Lesson 52 – Voting at a meeting

• Legal English – Peter’s Pills – Lesson 51 – Contracts vs Deeds

• Legal English – Peter’s Pills – Lesson 50 – Executive and Non-Executive Directors

• Legal English – Peter’s Pills – Lesson 49 – Transfer of shares vs transmission of shares

• Legal English – Peter’s Pills – Lesson 48 – They, them, their for singular nouns

• Legal English – Peter’s Pills – Lesson 47 – Jointly and severally

• Legal English – Peter’s Pills – Lesson 46 – Invoice words

• Legal English – Peter’s Pills – Lesson 45 – Quotation

• Legal English – Peter’s Pills – Lesson 44 – Gazumping and Gazundering

• Legal English – Peter’s Pills – Lesson 43 – English words that the English do not understand

• Legal English – Peter’s Pills – Lesson 42 – Easement vs Profit à prendre

• Legal English – Peter’s Pills – Lesson 41 – er, -or and -ee names

• Legal English – Peter’s Pills – Lesson 40 – The Objects Clause

• Legal English – Peter’s Pills – Lesson 39 – When is Latin hot, and when is it not?

• Legal English – Peter’s Pills – Lesson 38 – Default

• Legal English – Peter’s Pills – Lesson 37 – Company Agent

• Legal English – Peter’s Pills – Lesson 36 – Injunction (false freind)

• Legal English – Peter’s Pills – Lesson 35 – Mortgage

• Legal English – Peter’s Pills – Lesson 34 – Freehold, Leasehold and Commonhold estates

• Legal English – Peter’s Pills – Lesson 33 – Transferor, Transferee and Transmittee

• Legal English – Peter’s Pills – Lesson 32 – Tax evasion, tax mitigation and tax avoidance

• Legal English – Peter’s Pills – Lesson 31 – Numbers

• Legal English – Peter’s Pills – Lesson 30 – Ordinary resolutions vs special resolutions

• Legal English – Peter’s Pills – Lesson 29 – AGM vs EGM

• Legal English – Peter’s Pills – Lesson 28 – A going concern

• Legal English – Peter’s Pills – Lesson 27 – Collocations: Violate, breach, break, disobey and infringe

• Legal English – Peter’s Pills – Lesson 26 – Company meeting words

• Legal English – Peter’s Pills – Lesson 25 – Mortgagor vs Mortgagee

• Legal English – Peter’s Pills – Lesson 24 – Fixed charges vs Floating charges

• Legal English – Peter’s Pills – Lesson 23 – Doctrine

• Legal English – Peter’s Pills – Lesson 22 – Construe

• Legal English – Peter’s Pills – Lesson 21 – Sign vs Execute

• Legal English – Peter’s Pills – Lesson 20 – The closing statement

• Legal English – Peter’s Pills – Lesson 19 – Writing Business Emails

• Legal English – Peter’s Pills – Lesson 18 – Limited companies

• Legal English – Peter’s Pills – Lesson 17 – Annual Accounts

• Legal English – Peter’s Pills – Lesson 16 – Meetings

• Legal English – Peter’s Pills – Lesson 15 – Attorney-at-law vs Attorney-in-fact