Am I missing something?

Alex Hill alex_hill at arach.net.au
Sun May 23 21:14:07 EDT 2010


Thanks for the replies. How would I go about transferring the amount across at the end of the period? Would I just zero off the income/expense account and increase/decrease retained earnings appropriately (then from retained earnings to owners drawings if required)? 
  ----- Original Message ----- 
  From: Pablo Francesca 
  To: Alex Hill 
  Cc: gnucash-user at gnucash.org 
  Sent: Monday, May 24, 2010 12:15 AM
  Subject: Re: Am I missing something?


        Equity is realized over a defined period of time. When you close your books for the month/quarter/year, that is when you will realize profits and affect the equity account.
        If your anxious to see how you stand profit-wise, just run an income report.  The net income is the amount your equity will change at then end of the accounting period.

        Think of a change in equity as the time when you actually claim your profits.  Or think of a change in equity as the time you actually realize profits.  One might say that it is arbitrary that at the end of one period you can claim a profit and the next day you cant, but that is the nature of accounting.  

        Of course, I'm not an accountant so there might be a better explanation.

        --- On Sun, 5/23/10, Alex Hill <alex_hill at arach.net.au> wrote:


          From: Alex Hill <alex_hill at arach.net.au>
          Subject: Am I missing something?
          To: gnucash-user at gnucash.org
          Date: Sunday, May 23, 2010, 8:06 AM


          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?

       



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