Usage question: equity balance not reflecting change in asset balance

[Mike or Penny Novack]

Dominic,

Accounts of type "income" and "expense" are temporary accounts of 
fundamental type equity. So in a sense you are right in being surprised 
not to see in the example you mentioned, a change to equity.

The problem is were income and expenses booked as immediate changes to 
equity as they happened there would be no way to keep track of totals 
for the time period. The purpose of accounting is to provide information 
that is useful. So ..........

a) Income and expense are kept separate. For any time period you choose 
you can produce a report (income statement, aka profit and loss 
statement, aka revenue statement, etc. --- depends on what kind of 
entity the books are for). This report will show the change to equity 
(gain or loss "retained")

b) You may have seen references to "closing the books". In traditional 
bookkeeping the income, at the end of the accounting cycle, all income 
and expense accounts would be closed to an account called "profit and 
loss" and then that closed to equity. But the computer can produce the 
"profit and loss" without that step so juts closed directly to equity. 
In other words, the only accounts passing to the new accounting cycle 
are the standing or permanent account, those of type asset, liability, 
and equity (all income and expense accounts have zero balance the the 
transition)

Michael