Am I "Closing the Books" correctly?

[Derek Atkins]

Hi,

Micah Carrick <micah at greentackle.com> writes:

> Hey folks,
>
> This is largely more of a general accounting concept, but, since I'm not an
> accountant, maybe you guys can tell me if I have this right. I'm doing the
> books for my small business (partnership LLC) with GnuCash and want to see
> if my strategy for "closing the books" at the end of the accounting period
> is sound.
>
> Rather than using Equity:Opening Balances, I have setup "Capital" and
> "Draws" equity accounts for each partner:
>
> Equity
>     Doe, John
>         Capital
>         Draws
>     ...
>
> The balance in the Assets:Checking account initially came from each
> partner's equity capital account in the amount of their capital
> contribution.
>
> To close the books I zero out the balance of every Expense:* account and
> every Income:* account by:
>
> 1. Creating transactions to move those expense and income balances to each
> partner's equity capital account according to their share.
> 2. If any of that income is to be retained by the company I create another
> transaction from their equity capital account back to the Assets:Checking
> account.
> 3. If the partners are taking a draw then I create a transaction from the
> equity capital account to the equity draws account.
>
> Does that sound about right?

IANAA but yes, it sounds right.   I'm sure someone with more real
accounting background will reply if I'm wrong.  :)

> - Micah

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-derek

-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       warlord at MIT.EDU                        PGP key available