Equity-Opening Balance

[David T.]

I found a couple of definitions that follow Jeff's description:

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Equity. In the broadest sense, equity gives you ownership. If you own stock, you have equity in, or own a portion -- however small -- of the company that issued the stock.

Having equity is the opposite of owning a bond or commercial paper, which is a debt the company must repay to you.

Equity also refers to the difference between an asset's current market value -- the amount it could be sold for -- and any debt or claim against it. For example, if you own a home currently valued at $300,000 but still owe $200,000 on your mortgage, your equity in the home is $100,000.

The same is true if you own stock in a margin account. The stock may be worth $50,000 in the marketplace, but if you have a loan balance of $20,000 in your margin account because you financed the purchase, your equity in the stock is $30,000.
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For what it's worth, the OP might want to examine Gnucash's own help and concepts documentation, available at gnucash.org.

And then, there's us!

David

--- On Wed, 1/27/10, Jeff Kletsky <gnucash at allycomm.com> wrote:

> From: Jeff Kletsky <gnucash at allycomm.com>
> Subject: Re: Equity-Opening Balance
> To: "Collier-Sanuki Yoko" <ymcolliersanuki at alaska.edu>
> Cc: gnucash-user at gnucash.org
> Date: Wednesday, January 27, 2010, 7:58 AM
> Accounting is a pretty bizarre thing
> at least until you figure out why it "works."
> 
> The basic rule is "everything comes from somewhere and goes
> to somewhere" -- this means that you can (or your computer
> can) sum up two sets of numbers and, if they match, the
> "books balance" -- if not, you made a mistake somewhere.
> 
> There are a few big categories:
> 
> Income -- Money you "make" -- things that, for some reason,
> add to your "big pile of money" (BPOM)
> Expenses -- Money you "spend" -- things that take away from
> your BPOM
> 
> Liabilities -- Money you "owe" -- things that will
> eventually take away from your BPOM
> Assets -- Money you are "owed" -- things that eventually
> should/could add to your BPOM
> 
> Equity -- ok, this is the funny one
> 
> Think about Equity as how much you have invested, or think
> of it in the personal accounting world as how much you were
> worth at the end of the year (or just before you opened your
> current books). For more practical approach, Equity is the
> bucket you put your opening balances into so that id doesn't
> mess up looking at the more tangible ideas of
> ( income - expenses ) + ( assets - liabilities )
> 
> What else goes in Equity? For a personal set of accounts,
> often not much else. So yes, it is something of an arcane
> "standard accounting practice" that the account structure
> for personal use is "Equity:Opening Balances" rather than
> just calling it "Opening Balances"
> 
> For businesses, it is a lot more complicated with investors
> and shareholders and needing to produce periodic reports.
> You may hear of "closing the books" for a business -- what
> they basically do is "roll up" many of the accounts into
> Equity accounts so that the new period has "zero balances"
> starting off in the basic accounts -- In a business you
> often want your account balance to represent "how much have
> I sold this year" as opposed to "how much have I sold since
> I started the company"
> 
> On 1/27/10 7:01 AM, Collier-Sanuki Yoko wrote:
> > I'm a new user.  I've searched and read various
> GnuCash information but cannot find an answer to my simple
> question:
> > 
> >     GnuCash creates as a default
> "Equity" place holder and "Opening Balance" under it.
> >     But what else goes under
> "Equity"?  Why not just make "Opening Balance"
> top-level account?
> > 
> 
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