What are Net Assets?

Net assets is defined as the total assets of an entity, minus its total liabilities. The amount of net assets exactly matches the stockholders’ equity of a business. In a nonprofit entity, net assets are subdivided into unrestricted net assets and restricted net assets.

How to Calculate Net Assets

To calculate net assets for a business, start by determining the company’s total assets, which include current assets (like cash and accounts receivable) and non-current assets (like property and equipment). Next, calculate total liabilities, including both current obligations (such as accounts payable and short-term loans) and long-term liabilities (like bonds payable). Subtract the total liabilities from the total assets using the following formula:

Net assets = Total assets – Total liabilities

The resulting figure represents the owner's equity or net worth of the business.

Presentation of Net Assets

Net assets are clearly delineated in the statement of financial position of a nonprofit entity. This line item is highlighted in the following exhibit.