What describes the accounting term 'equity'?

The accounting term 'equity' refers specifically to the owner's claim on the assets of a business after all liabilities have been deducted. This means that equity represents the residual interest in the assets of the entity after all debts and obligations are accounted for. It essentially reflects the ownership stake of shareholders or owners in the business.

Equity can increase through profitable operations or additional investments by owners and can decrease as a result of losses or distributions to owners. It is a crucial part of the accounting equation: Assets = Liabilities + Equity. This equation highlights how equity serves as a bridge between the total assets of the business and its liabilities, ensuring a comprehensive view of the financial position of the business.

In contrast, the other options represent different concepts within accounting. Total liabilities refer to what the business owes to others, total revenue pertains to income generated from operations, and expenses reflect costs incurred in running the business, all of which are distinct from the owner's claim on assets. Understanding equity is fundamental to grasping the financial health and ownership structure of a business.