Balance Sheet Confusion

[Charles Day]

On Mon, Jul 7, 2008 at 3:20 PM, Tony Nelson <tonyn at openlearning.com> wrote:

> Hi All,
>
> I hope you don't mind if I share some numbers as I think it will make my
> question clearer.
>
> In QuickBooks I have used "Retained Earnings" to designate earnings that
> remain in the company as we move forward from one year to the next.  So
> I have set up an equity account called "Retained Earnings".
>
> GnuCash seems to use Retained Earnings to record a running Income
> Statement, yet this GnuCash Retained Earnings number does not match
> anything that I can find.
>
> Anyway, here is part of my balance sheet:
>
> Equity
> Equity
>    Common Stock                $47,686.74
>    Retained Earnings          $8,991.13
> Retained Earnings              $29,896.63
> Total Equity                   $29,948.14
>
> Now if I take the Common Stock value ($47,686.74) and add it to my
> retained earnings figure ($8,991), and subtract my current net income as
> shown on my GnuCash Income Statement for this year (-$26,729.73) I end
> up with $29,948.14 -- My Total Equity number above.
>
> I have two questions:
>
> 1) Why does my Net Income not show up in the Equity portion of the
> balance sheet (it does under QuickBooks)?
>
> 2) What is the $29,896.63 number and where did it come from?
>

According to the code, the GnuCash Retained Earnings line is supposed to be
the sum of all expense and income account entries from the beginning of
time. Assuming your books were closed properly, the balances of all income
and expense accounts should have been zero at period start. So Retained
Earnings should match Net Income. If there is a problem with the math and we
can identify it, perhaps I can fix it. Does the balance sheet actually
balance, by the way?


>
> Thanks to any of you who take the time to work through this.
> --Tony
>
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