New Report to End All Reports

Mike or Penny Novack mpnovack at
Thu May 19 17:59:17 EDT 2016

On 5/18/2016 8:51 PM, John Ralls wrote:
>> On May 18, 2016, at 7:03 AM, Aaron Laws <dartme18 at> wrote:
>> On Tue, May 17, 2016 at 5:22 PM, John Ralls <jralls at <mailto:jralls at>> wrote:
>> The Balance Sheet report shows you net worth. You probably didn't recognize it because the accounting word for it is "equity". Recall that the accounting equation is Assets = Liabilities + Equity*, so by associativity Equity = Assets - Liabilities.
>> When we say Assets = Liabilities + Equity, it means All Assets = All Liabilities + All Equity. This works if I include all (non-$0) assets, liabilities and equity, and do so when there are no revenues nor expenses (just after closing the books). At any other time, or in any other way, that equation doesn't hold, and even in that specific case, it's not the information I'm seeking.

A bit of history (and you have NOT looked at the balance sheet carefully 

a) In double entry bookkeeping, originally there were no accounts of 
type income or expense. Transactions were immediately entered against 
equity. That made it possible to quickly/easily determine net worth at 
any moment, but all information about how income or expense categories 
were grouped was lost << I am talking several hundred years ago >> Then 
somebody got the bright idea to introduce accounts of type income and 
expense, actually temporary accounts of fundamental type equity. That 
allowed information about categories of income and expense to be seen. 
Then these (temporary) accounts were closed to another temporary account 
of type equity called "profit and loss report" and then finally that was 
close to equity itself (by the net gain or loss amount). That was the 
process of closing the books in the days of pen and ink on paper << and 
how I myself learned bookkeeping >>

b) Take closer look at the balance sheet under equity. Do you not see 
there a line for which you do not have an actual account? One that has 
the amount of the net of all income and expense accounts << it will 
either be a gain or a loss >>

The equation is always valid. The accounts of type income and expense 
are part of the equity side.

Michael D Novack

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