Equity

Mike or Penny Novack stepbystepfarm at mtdata.com
Fri Mar 5 07:33:44 EST 2010


c-a-l wrote:

>Actually, I thought I really understood the accounting concepts.
>
>I can't figure out if I am having a GnuCash program problem, or an problem
>understanding concepts.  I have finished entering 1.5 years of transactions
>for a relative whose finances I'm now responsible for.  
>
>As I have always understood, and as documented in the GnuCash user manual, 
> Assets - Liabilities = Equity.  (Let's ignore Income & Expenses for right
>now).
>
>However, when I go to Report/Balance sheet, the above math works for the
>opening balance, and the first month.  After that, the math no longer works.
>
>I've run lots of version of the Balance Sheet and isolated the problem  - it
>begins on the day that there was a foreign transaction - ie two different
>currencies - a deposit from a Euro account to a US dollar account.
>
>Is this a GnuCash bug or am I doing something wrong?  If so, how do I fix
>it.   I am obligated to turn in reports for this persons finances, and
>obviously can't turn in an unbalanced Balance sheet.  I sure hope this is
>fixable...
>  
>
Here's your problem ---- "Let's ignore Income & Expenses for right now".
Those are temporary accounts containing one side of transactions not yet 
closed to equity. So the full equation would be
Assets - Liabilities = Equity - Expenses + Income. If you run an "Income 
Statement" report for the period since last close of books it will show 
you the amount Income - Expenses that represents the difference not yet 
closed to Equity.

Michael D Novack

-- 
There is no possibility of social justice on a dead planet except the equality of the grave.



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