Equity Question

[dude man]

It is making a lot more sense now.

 

thanks for all your help
 
> To: maf at chilwell.net
> CC: carnmightyhawks at hotmail.com; gnucash-user at gnucash.org
> Subject: Re: Equity Question
> From: warlord at MIT.EDU
> Date: Thu, 20 Aug 2009 10:45:32 -0400
> 
> Chris,
> 
> "Maf. King" <maf at chilwell.net> writes:
> 
> > On Wednesday 19 August 2009 13:00:26 dude man wrote:
> >> Thanks for replying Maf.
> >>
> >> It kind of makes sense now. What I don't think I understand properly is
> >> the equation Assets - Liabilities = Equity
> >>
> >> >From my account view I see my assets add up to $1000 (for example). They
> >> > did add up to $1500 before I used one of my accounts to pay my Credit
> >> > Card (which had expenses of car and groceries) of $500
> >>
> >> So my starting Equity was $1500 and according to the equation it should add
> >> up $1000 but it still displays $1500.
> >>
> >> That is what I don't understand. I guess you can tell I'm not much of an
> >> accountant :)
> 
> You're confusing "equity" (the account type) with "Equity" the financial
> equation term (aka "Instantaneous Equity"). What you're really asking
> for is your Instantaneous Equity (IE). The equity accounts don't provide
> that, only reports provide that.
> 
> Remember the full accounting equation:
> 
> Eq = A - L + In - Ex
> 
> This is the Instantenous Equity equation. So as you add income and
> expenses to the equation then your equity accounts will NOT reflect your
> IE because Income and Expenses affect it.
> 
> If you run a Profit & Loss (Income Statement) Report that will show you
> the next profit for your period which is your change in Equity for the
> period. Then you can run a Balance Sheet and that will also show you
> your IE.
> 
> The equity accounts only show you your equity at a point in time,
> generally at the beginning of your accounting period (or when you
> started GnuCash). In order to get your equity accounts to reflect IE
> you need to "Close the Books", which basically means reducing all your
> Income and Expense into Equity. That will reset your start-of-period
> and now your equity accounts will reflect the IE at that time.
> 
> I hope this helps,
> 
> > Please remember to CC this list on all your replies.
> > You can do this by using Reply-To-List or Reply-All.
> 
> -derek
> 
> -- 
> Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
> Member, MIT Student Information Processing Board (SIPB)
> URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH
> warlord at MIT.EDU PGP key available

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