Balance sheet after using "Close book"?

[Mike or Penny Novack]

Soren

>I'm pretty much proxying a request from my accountant.
>
>  
>
I think (but of course not sure) that one of the following is true:
a) He doesn't think you would be able to produce the reports. So he 
wants the whole thing and he'll do the reports.
b) You misunderstood

>>Need a little bookkeeping/accounting basics?
>>    
>>
>
>Probably a lot.
>  
>
Yes

>
>As an aside, all the information I've been able to find about my
>end-of-year "summary thing" (I'm crossing my fingers that "summary
>thing" doesn't have any unintended connotations) says that my liabilites
>are supposed to include my... um...  "balance," I think is the word I'm
>looking for. I.e. my income minus my expenses should be tracked as a
>liability. I understand that this should make my assets equal my
>liabilities, but the "target" accounts for "Close Book" are equity
>accounts, and Gnucash refuses to put such an account under Liabilities.
>
>I've always found it weird that the amount of money I've made
>(Income-Expenses) turns out to be a liability, but I suppose I'll get
>used to that eventually.
>  
>
Not quite. You aren't understanding the part of the double entry system 
called "equity". The fundamental equation is
assets = liabilities + equity
That's the usual way shown to avoid any subtracting (double entry 
bookkeeping only adds) but it may make more sense to you as
assets - liabilities = equity
In other words, what you have minus what you owe is your net worth.

Income minus expenses (net gain or loss) goes on the liability side of 
the fundamental equation but you should think of that as a change to 
equity (not to liability).

As I explained, hundreds of years ago each income or expense transaction 
was immediately added to one side of the other of the equity ledger. But 
that made it hard to see totals of the various income and expense 
categories. So it became the fashion to defer that until closing the 
books. by use of "income" and "expense" accounts.

I think what seems weird to you is that the net gain or loss (income - 
expense) is added to the right hand side of the fundamental equation. 
You are forgetting that this is double entry and the other side of that 
transaction was already added to one side or the other of some asset 
account. Does that make sense now?  In the fundamental equation  assets 
= liabilities + equity  you are adding the same  amount to both sides of 
the equation  (in effect).  The sum total  of a "set of books" is always 
zero (in balance).

Michael

>Ok. I see how that makes sense. My accountant (a well-respected,
>reasonably big accounting company here in Denmark) just suggested that
>it was was normal procedure to have this single summary page with the
>totals of all the accounts. Perhaps I misunderstood.
>  
>
NOW you are talking about something else; the final form of 
presentation. Yes of course, when I present the annual report to the 
board of directors of of one of the organizations for which I am 
treasurer it is one printout (actually takes several pages but you can 
think of this as "one report"). Where you are going wrong (don't worry, 
you are in good company here) is in expecting GnuCash to produce this 
final version. A waste of time to ask the accounting program to do that 
all by itself. There are many different "final forms", they may require 
annotations and fixed text (ours often the former and always the 
latter). For example, I already mentioned accounting for fixed assets 
--- what is your organization's policy (its de minimis amount and method 
of depreciation). That's IN our annual reports which get filed.

How does it get there? How does the Balance Sheet and the Income 
Statement get into one report (and since we're tax exempt orgs, how does 
the name of the part which is the latter get changed to "Statement of 
Revenues") and how does this current period get presented side by side 
with the previous period (again how it's done for a non-profit). We use 
a TEXT editor. It would be silly to write one of these just for an 
accounting program as there are plenty of text editors out there and 
each of us has our favorite. So you ask GnuCash to produce your balance 
Sheet(s) and Income Statement(s) and then you begin editing your 
document and you copy (cut and paste) the data from GnuCash where you 
want it. From there it depends how fancy you need to be. None of my orgs 
are that big and fancy but if it were, then after "word processing" you 
go on to a "print compositor" if this were going to get printed in a 
glossy annual report (in other words, you'd be using things like LaTex 
for the editing).

Michael