What are net assets?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
Net assets are what is left when a business's total liabilities are taken away from its total assets. The figure shows the value that belongs to the owners according to the books, and a balance sheet works it out after listing everything owned and owed. It is also called net worth or owner's equity.
Net assets are a book figure, not a price. Assets are shown at their value in the records, so net assets can differ from what the business would sell for, and they may leave out things the books do not record, such as the value of a business's reputation.
The figure moves for clear reasons. Profits kept in the business and capital contributed by the owner increase it. An owner's loan to a company increases its cash and liabilities equally, leaving net assets unchanged. Losses reduce it, and so do drawings, a sole trader's or partner's personal expenses paid from the business account. If liabilities are larger than assets, net assets are negative, which is worth raising with your accountant.
In Australia
business.gov.au defines net assets as your total assets minus your total liabilities, also known as net worth, owner's equity or shareholder's equity. Its balance sheet template adds current and fixed assets to get total assets, adds current and long-term liabilities to get total liabilities, and subtracts one total from the other.
It says a balance sheet gives a picture of a business's financial health at a given moment and lets you find out your net assets at that time. Its record keeping guidance notes that good records help you demonstrate your financial position to banks or other lenders, and its financial health guidance notes there are several ways to value a business, with professional advice available to help you choose.
Worked example
| Item | Amount (AUD) |
|---|---|
| Net assets at the start of the year | 18,500.00 |
| Add net profit for the year | 22,300.00 |
| Add capital the owner contributed | 5,000.00 |
| Less drawings | 19,800.00 |
| Net assets at the end of the year | 26,000.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Treating net assets as the price the business would sell for.
- Reading a fall in net assets as a trading loss without checking whether drawings caused it.
- Comparing net assets from a balance sheet prepared before all of the period's bills and bank transactions were recorded.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Set up a balance sheet
business.gov.au, Australian Government. Current at 15 October 2026, released 18 January 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Record keeping
business.gov.au, Australian Government. Current at 15 October 2026, released 7 November 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Review your financial health
business.gov.au, Australian Government. Current at 16 October 2026, released 20 May 2025. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.