Shareholders' equity includes share capital and reserves Steps:

• Define shareholders' equity as the residual interest in assets after deducting liabilities, per accounting standards like IFRS or GAAP.
• Classify items: ordinary share capital (3) and general reserves (1) are equity components from owner contributions and accumulations.
• Include retained earnings (5) as undistributed profits belonging to shareholders.
• Exclude long-term loan (2) as it's a liability; note preference shares (4) are equity but not in option C, focusing on core ordinary equity elements here. Why C is correct:
• Option C (1,3,5) matches the definition of shareholders' equity: reserves, ordinary share capital, and retained earnings represent owners' claims. Why the others are wrong:
• A includes liability (2), not equity.
• B includes liability (2), excluding reserves (1).
• D includes liability (2) and nonexistent item (6).

Final answer: C