Equity is the owner's stake in the business. In a sole proprietorship it is owner's equity, shown as a single line item, Capital; in a private limited company (G3 only) it is shareholders' equity, shown as Share capital plus Retained earnings. By the accounting entity theory, only transactions affecting the business are recorded.
Owner's equity (both tiers). Closing capital = Opening capital + Contributions + Profits (− Losses) − Drawings. Capital is credit-natured: contributions and profit are credited, drawings and loss are debited. Drawings are business assets taken by the owner for personal use — not an expense. At year-end, Drawings is closed to Capital (Dr Capital / Cr Drawings) and the Income summary is closed to Capital (profit: Cr Capital; loss: Dr Capital). In the Statement of Financial Position, the equity section shows Capital with the working shown inline.
Interpreting the accounts. Read the debit/credit in the account together with the Particulars column, which names the other account. In a Capital account, "Income summary" on the credit side is profit, on the debit side is loss; "Drawings" on the debit side is the year's drawings.