What does equity represent in an accounting context?

Equity in accounting represents the residual interest in the assets of a business after deducting liabilities. This can be understood using the accounting equation: Assets = Liabilities + Equity. By rearranging this equation, equity can be defined as Assets minus Liabilities. Therefore, it reflects the ownership value in the company, essentially what is left for the owners once all debts have been settled.

This is fundamental to understanding a company's financial health, as it indicates how much ownership interest shareholders have in the firm. The other options focus on different financial metrics that do not capture equity's essence; for example, total revenues and net income pertain to the performance of the firm over a period, while liabilities only refer to what the firm owes and do not represent ownership interest.