Closing the Books

[Girard Aquino]

Mike or Penny Novack wrote:
>
>>>> Hi All,
>>>>
>>>> I see an option in gnucash to "close the books" (Tools -> Close Book).
>>>> I could not find any documentation on this feature.  Can anyone 
>>>> tell me
>>>> how to determing exactly what happens when this tool is used?      
>>> It zero-izes your Income and Expense accounts into Equity.
>
>>> Meaning all of the money you have left after all the expenses, all 
>>> the assets you have, etc... will be summed and the remaining 
>>> asset/money you have will be your Equity right? And this should be 
>>> done when you want to start a new? like for example at the end of 
>>> the year? what happens to all of the transactions for the previous 
>>> year supposing.
>>>   
>>>> Thanks!
>>>> --Tony
>>>>
>>>>     
> Not exactly like starting new. This is accounting basics. The only 
> permanent accounts that should have non-zero balances at the end/start 
> of an accounting cycle are of type asset, liability, and equity -- can 
> of course be sub accounts of these parents. Income and expense 
> accounts are temporary accounts used during the cycle to characterize 
> activity that is ultimately affecting equity. At the end of the cycle 
> these are closed into equity -- in the old pen and ink on paper days 
> this would be via a temporary equity account called something like 
> "profit and loss" but that's an unnecessary step with an automated 
> system like GnuCash which can generate that report without first 
> closing the income and expense accounts into a temporary "summary 
> account".
and from the accounting perspective, should closing books be done at the 
end of every cycle? what would happen as regards reading data in GnuCash 
when one doesn't close books?
>
> Michael
>
> Michael
>
>



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