Balance sheet after using "Close book"?

[Soren Hansen]

On Wed, Jun 23, 2010 at 11:50:59AM -0400, Mike or Penny Novack wrote:
>>I'm pretty much proxying a request from my accountant.
> I think (but of course not sure) that one of the following is true: a)
> He doesn't think you would be able to produce the reports. So he wants
> the whole thing and he'll do the reports.  b) You misunderstood

Good point.

>> As an aside, all the information I've been able to find about my
>> end-of-year "summary thing" (I'm crossing my fingers that "summary
>> thing" doesn't have any unintended connotations) says that my
>> liabilites are supposed to include my... um...  "balance," I think is
>> the word I'm looking for. I.e. my income minus my expenses should be
>> tracked as a liability. I understand that this should make my assets
>> equal my liabilities, but the "target" accounts for "Close Book" are
>> equity accounts, and Gnucash refuses to put such an account under
>> Liabilities.
> >
>> I've always found it weird that the amount of money I've made
>> (Income-Expenses) turns out to be a liability, but I suppose I'll get
>> used to that eventually.
> Not quite. You aren't understanding the part of the double entry
> system called "equity". The fundamental equation is assets =
> liabilities + equity That's the usual way shown to avoid any
> subtracting (double entry bookkeeping only adds) but it may make more
> sense to you as assets - liabilities = equity In other words, what you
> have minus what you owe is your net worth.

I think I understand the maths ok. It's the presentation that gets me.
Everywhere I've seen this presented (in examples on-line([1] and [2],
for instance) or in my years of serving on various boards of different
organisations), equity is listed under liabilities.

[1]: http://en.wikipedia.org/wiki/Balance_sheet#US_small_business_balance_sheet
[2]: http://en.wikipedia.org/wiki/Balance_sheet#Sample_balance_sheet_structure

> As I explained, hundreds of years ago each income or expense
> transaction was immediately added to one side of the other of the
> equity ledger. But that made it hard to see totals of the various
> income and expense categories. So it became the fashion to defer that
> until closing the books. by use of "income" and "expense" accounts.

That makes sense.

>> Ok. I see how that makes sense. My accountant (a well-respected,
>> reasonably big accounting company here in Denmark) just suggested
>> that it was was normal procedure to have this single summary page
>> with the totals of all the accounts. Perhaps I misunderstood.
> NOW you are talking about something else; the final form of
> presentation. Yes of course, when I present the annual report to the
> board of directors of of one of the organizations for which I am
> treasurer it is one printout (actually takes several pages but you
> can think of this as "one report"). Where you are going wrong (don't
> worry, you are in good company here) is in expecting GnuCash to
> produce this final version.

Thanks for clearing this up. I'll stop trying to wring gnucash into
doing everything for me. :)

-- 
Soren Hansen <soren at linux2go.dk>
Systems Architect, The Rackspace Cloud
Ubuntu Developer