Account Summary and Balance Sheet

[Ernst Arnold]

Hi,
This is about Gnucash 1.8.11 on Fedora Core 3.

I am new to gnucash and I know only a little bit of accounting. As far as I 
understand the balance sheet (BS) is the single most important piece of 
information that the accounts can produce. It is based on the account summary 
(AS), which is simpler to understand.

In a correct AS the overall sum must be 0 if there are no unbalanced 
transactions. I have a gnucash file that does not satisfy that condition!
on 1/7/03: sum(AS)=0
on 2/7/03: sum(AS)=-2
But if I add up the sums in the AS by hand I get 0!!
>From the gnucash help:"... is known as the Accounting Equation:
Assets - Liabilities = Equity + (Income - Expenses)"
That is:
Assets - Liabilities - Equity - Income + Expenses = 0
Gnucash AS seems to report as Total:
Assets - Liabilities - Equity
which does not give me an indication whether things are balanced.
What is the meaning of: Assets - Liabilities - Equity?
Assets - Liabilities - Equity = Income - Expenses
Wouldn't that be better reported in the profit loss report?

Maybe the Label "Total" in the AS did mislead me, it is the "Total of only the 
income and expense accounts".
So my suspicion that the AS was incorrect proves to be unfounded.


But then 30/6/04: sum(AS) = 329.31 although expense and income are 0 !
So there is one more problem with the AS. First guess: the equity is wrong,
because asset and liability are easy to understand. (the file has only one 
single currency, but there are shares and bonds. I have reduced the original 
multi-currency file by eliminating all foreign currency accounts and by 
balancing currency transfers against the owners equity. I did this in the 
hope that it was a currency problem which would disappear. Alas it didn't)

Is it possible to conclude that the 329.31 are due to variations in commodity 
prices? Then the 329.31 would be unrealised capital gain/loss. 

What does the BS say about that?
On the BS report the Equity includes (Income - Expenses)
therefore here the accounting equation is Assets = Liabilities + Equity
The AS did prove that this gnucash file does not fullfill this equation.
Consequently the balance sheet is out of balance by the same amount.
There is a row titled unrealised capital gain/loss in the BS. How is that 
calculated?
Why is it not used in this case to balance the equation?


Another question about the BS: why is there a date range in the title? The BS 
is a snapshot at one point in time and there can be only one date of the 
snapshot.

Generally I like Gnucash very much. I think the accounts tree is much more in 
line with accounting practices than the categories in Quicken. The account 
tab alone gives quite a lot of information. Adhering to the theroy of double 
entry accounting is a great help to me. It would be nice if I could 
understand the mentioned peculiarities of Gnucash to give me more confidence 
in the reports.
Best Regards
Ernst