Am I missing something?

[Derek Atkins]

Hi,

On Sun, May 23, 2010 10:06 am, Alex Hill wrote:
> I am a little confused about the relevance of the accounting equation:
>
> Assets = Liabilities + Owners Equity
>
> When I make up an invoice (service) I increase cash and sales accounts,
> but there is no change in the equity accounts. Am I missing a step? Should
> I somehow be increasing my owners equity / retained earnings etc when
> invoices are paid off?

you've got the equation somewhat wrong.  The actual equation is:

  Equity = Assets - Liabilities + Income - Expense

Your equity accounts only show your owners equity at a point in time. 
They do not show your instantaneous equity.  For the latter, run a Balance
Sheet report.

> Cheers,
> Alex

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-derek