Calculating equity: two methods, one result
Equity follows from the balance sheet in two ways. Both must give the same amount. If not, there is a mistake somewhere.
The short answer
Equity is assets minus provisions and liabilities (including accruals and deferred income). It is also the sum of issued share capital, share premium, reserves and undistributed profit (art. 2:373(1) DCC). Both routes give the same amount. Dividing by the balance sheet total gives solvency. This page covers Dutch annual accounts under the Dutch Civil Code (DCC).
Updated 30 October 2026
Key facts
| Law | art. 2:373 DCC: equity items; art. 2:362(2) DCC: before or after appropriation of profit |
| Guideline | RJ 240 (revised in 2026, effective for financial years from 2027); RJk B8 (unchanged since financial year 2024) |
| Applies to | Financial years 2025, 2026 and 2027: the items of art. 2:373 DCC are the same in those years |
Method 1: from the assets
Add up all assets and deduct the provisions and the liabilities, including accruals and deferred income. What remains is equity: what the shareholders have in the legal entity. If liabilities and provisions exceed assets, equity is negative.
Method 2: from the sources
Add up what the shareholders have contributed and what the legal entity has retained. The law names seven items (art. 2:373(1) DCC):
- issued share capital; if it is not fully paid up, you state the paid-up and called-up capital and show the issued capital separately (art. 2:373(2) DCC);
- share premium (agio): what is paid in above the nominal value (concept);
- revaluation reserves;
- other statutory reserves, distinguished by nature, such as the reserve for capitalised development costs;
- reserves required by the articles of association;
- other reserves;
- undistributed profits, with the result after tax of the financial year shown separately, to the extent the appropriation is not reflected in the balance sheet.
Capital is not reduced by own shares held by the legal entity or a subsidiary (art. 2:373(3) DCC). More on the reserves: equity in the annual accounts and statutory reserves.
Case: Bakker Techniek BV
The balance sheet of Bakker Techniek BV (a Dutch private limited company) at 31 December 2025, before appropriation of profit:
| Assets | Amount | Liabilities and equity | Amount |
|---|---|---|---|
| Intangible fixed assets (development) | € 15.000 | Provisions | € 25.000 |
| Tangible fixed assets | € 165.000 | Non-current liabilities | € 120.000 |
| Financial fixed assets | € 20.000 | Current liabilities and accruals | € 130.000 |
| Inventories | € 60.000 | Equity | € 225.000 |
| Receivables and prepayments | € 95.000 | ||
| Cash and cash equivalents | € 145.000 | ||
| Total | € 500.000 | Total | € 500.000 |
Method 1: € 500.000 − € 25.000 − € 120.000 − € 130.000 = € 225.000.
| Equity item | Amount |
|---|---|
| Issued share capital | € 10.000 |
| Share premium | € 30.000 |
| Statutory reserve for development costs | € 15.000 |
| Other reserves | € 140.000 |
| Result after tax of the financial year (not yet appropriated) | € 30.000 |
| Equity | € 225.000 |
Method 2: € 10.000 + € 30.000 + € 15.000 + € 140.000 + € 30.000 = € 225.000. The statutory reserve equals the capitalised development costs (art. 2:365(2) DCC).
After appropriation of profit. If the general meeting decides to add the profit of € 30.000 to the other reserves, they become € 170.000 and the separate profit line falls away: the total remains € 225.000. If it pays out € 20.000 in dividend, € 10.000 goes to the other reserves (€ 150.000) and equity is € 205.000 (€ 10.000 + € 30.000 + € 15.000 + € 150.000), and liabilities rise by € 20.000 of dividend payable, as long as it has not been paid out.
Solvency: € 225.000 divided by € 500.000 is 45,0%. See how BVs score per sector on solvency by sector and calculate your own with the ratio calculator. The return on equity is € 30.000 divided by € 225.000: 13,3%.
Deriving the result from equity
With equity at the beginning and at the end of the year you can also calculate the result, without reading the profit and loss account. The result is the growth in equity, adjusted for what does not come from the business: what shareholders contribute is not profit and a dividend paid out is not a loss. This calculation is called the net worth comparison (vermogensvergelijking). If you are looking for the balance sheet method for equity, this calculation comes closest: you derive the result from two balance sheets. If your assignment or course gives that term its own definition, follow that one.
In the example of Bakker Techniek BV, equity at 31 December 2024 (before appropriation of profit) was € 200.000. In 2025 a shareholder contributed € 10.000 as share premium and the general meeting decided to pay € 15.000 in dividend over 2024.
| Calculation | Amount |
|---|---|
| Equity at 31 December 2025 (see the balance sheet above) | € 225.000 |
| Minus: equity at 31 December 2024 | − € 200.000 |
| Growth in equity | € 25.000 |
| Minus: capital contribution in 2025 | − € 10.000 |
| Plus: dividend paid in 2025 | + € 15.000 |
| Result 2025 | € 30.000 |
That is the same amount as the result after tax in the case. Check the other way round: € 200.000 + € 10.000 contribution − € 15.000 dividend + € 30.000 result = € 225.000.
It only works if you know all movements that do not go through the profit and loss account. A revaluation that goes directly to the revaluation reserve (art. 2:390(1) DCC) increases equity without any result having been earned: remove it. If you only see two filed balance sheets of another legal entity, you often do not know the dividends and contributions, and the difference is only an approximation. The outcome is the commercial result; the taxable profit follows from the tax return and can differ.
By size class
| Class | What you show |
|---|---|
| Micro-entity (balance sheet total ≤ € 450.000, net turnover ≤ € 900.000, < 10 employees) | Equity as a single item, aggregated (art. 2:395a(4) DCC) |
| Small legal entity (balance sheet total ≤ € 7,5 mln, net turnover ≤ € 15 mln, < 50 employees) | The items of art. 2:373(1) to (5), first sentence (art. 2:396(3) DCC) |
| Medium-sized legal entity (balance sheet total ≤ € 25 mln, net turnover ≤ € 50 mln, < 250 employees) | Same, in full (art. 2:397(5) DCC) |
| Large legal entity (balance sheet total > € 25 mln, net turnover > € 50 mln, ≥ 250 employees) | In full, with the statement of movements of art. 2:378 DCC |
Common mistakes
- Counting a shareholder loan. It remains a liability. Only if the shareholder waives repayment do you record it as a capital contribution.
- Forgetting provisions or accruals, so that equity comes out too high.
- Leaving out the profit of the year in method 2, so that the two results do not balance.
- Mixing tax and commercial figures. Equity for tax purposes is a different quantity.
- Treating the current account with the DGA (director-major shareholder) as equity: it is a receivable or a liability.
Sources
- Art. 2:373 DCC: equity (wetten.overheid.nl, in Dutch)
- Art. 2:362 DCC: before or after appropriation of profit (wetten.overheid.nl, in Dutch)
- Art. 2:390 DCC: revaluation reserve (wetten.overheid.nl, in Dutch)
- Wikipedia: Vermogensvergelijking (in Dutch)
- Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving): guidelines
Frequently asked questions
How do I calculate equity?
Deduct the provisions and the liabilities, including accruals and deferred income, from total assets. You get the same result by adding up issued share capital, share premium, reserves and undistributed profit.
What items make up equity?
Issued share capital, share premium, revaluation reserves, other statutory reserves, reserves required by the articles of association, other reserves and undistributed profits (art. 2:373(1) DCC).
Can equity be negative?
Yes. If liabilities and provisions exceed assets, equity is negative, usually because the other reserves are negative. See the page on negative equity.
Does a shareholder loan count as equity?
No, a loan is a liability. If the shareholder waives repayment without consideration, you record that as a capital contribution, usually as share premium. Have such a situation reviewed.
What is the link with solvency?
Solvency, also called the solvency ratio, is equity divided by balance sheet total. With € 225.000 of equity on a balance sheet total of € 500.000, that is 45,0%.
What is the balance sheet method for equity?
If you mean deriving the result from two balance sheets, that is called the net worth comparison (vermogensvergelijking): equity at the end minus equity at the beginning, minus what shareholders have contributed, plus dividends and other distributions. With € 200.000 at the beginning, € 225.000 at the end, € 10.000 contributed and € 15.000 dividend, the result is 225.000 − 200.000 − 10.000 + 15.000 = € 30.000.
Can I calculate profit from the difference in equity?
Yes, if you also know the capital contributions and distributions of the year. Without those corrections, a contribution wrongly counts as profit and a dividend as a loss. Movements that go directly through equity, such as a revaluation to the revaluation reserve, must be removed.
Read more
Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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