The term own resources refers to the contributions of the shareholders or partners who subscribe the capital of a company, the profits obtained that have not been distributed among its shareholders in the form of dividends, as well as the reservations they have to face extraordinary situations.
This implies that the concept of own resources is defined as the difference between the assets and liabilities of an entity at a given moment.
Here we can find some examples of own resources. Among the main items of equity are:
- Capital from shareholders' contributions.
- Reserves: with the benefits of previous years that are in their accounts and that have not been distributed among the partners.
- Result of the campaign: according to the losses or gains achieved during the year.
Origin of own resources
When a company has the ability to generate large profits and increase the amount of its own funds, possible investments in projects or expenses to be assumed can be borne from this source, without having to resort to external financing. This will reduce dependence on debts with third parties, especially with financial entities or third-party funds.
In summary, it can be said that own resources are those contributed by the owners or partners, those generated by the company's activity and that have not been distributed and those provided by third parties without any obligation to return it. In the latter case, reference would be made above all to possible subsidies from the administrations. From the accounting point of view, it includes reserves, capital, non-refundable capital grants and results pending application.
The opposite of own resources are the external resources, which are in the liabilities of the balance sheet, being considered as payment obligations. It is usually constituted mainly by debt with banks and with creditors.
Equity formula
To calculate the own resources of a company it is necessary to make the sum of all the components that make them up. In this way we will be able to know how much all the resources that belong to the company amount to.
The formula for own resources is: Own resources = Subscribed capital (Own funds) + Bookings + Undistributed profits (Results for the financial year)