The right side of the balance sheet represents the sources of enterprise assets.Liabilities represent the amount of assets that was financed by lending sources，and shareholders'equity represents:(1)the amount that was contributed by the shareholders and(2)the portion that was earned and retained by the enterprise.While this explanation is accurate and may seem simple enough，shareholders' equity is generally the least understood section of the financial statements because of its distinctive accounting terminology and its legalistic nature.

The owners of an enterprise bear the ultimate risks and uncertainties and receive the benefits of enterprise operations.Their interest in the enterprise is measured by the difference between the assets and the liabilities of the enterprise.Owners'or shareholders'interest in a business enterprise is a residual interest in the sense that it ranks after liabilities as a claim to or interest in the assets of an enterprise.The amount of shareholders'equity is not fixed;it depends on the enterprise's profitability.Shareholders'equity grows if the enterprise is profitable and shrinks or may disappear entirely if the enterprise is unprofitable.