In accounting, equity is defined as:

Equity in accounting represents the owner's claim on the assets of the business after all liabilities have been deducted. This definition aligns with the concept that equity is essentially the residual interest or net worth of the entity. It encompasses all the investments made by the owners (such as initial capital contributions) plus any retained earnings, which are profits that have not been distributed as dividends.

The notion of residual interest highlights that equity measures what is left for the owners after satisfying all debts and obligations of the business. It is calculated using the equation: Equity = Assets - Liabilities. This understanding is foundational in both financial accounting and balance sheet preparation, as it provides insights into the financial health of a business.

Other options do not correctly define equity. The assets owned by the business refer simply to what the business possesses, while total obligations pertain to the liabilities that the business must settle. Total revenue generated by the business details the income earned over a period but does not account for its obligations or the net worth, which is what equity reflects.