Am I missing something?

Pablo Francesca rshgeneral at yahoo.com
Mon May 24 01:06:31 EDT 2010


I think someone already answered this.  It sounds like you want to "move" a number into the equity account so that you can "draw" from owners equity. 

There is nothing in the accounting equation preventing you from just creating an owner's draw transaction.  You credit (decrease) your bank (or in your cash I think, cash) account and debit (decrease) an equity account.  You shouldn't be surprised when your equity account shows negative.  Think about it for a while.  As long as you're not drawing more than your net income for the period (and providing that you are able to maintain your necessary cash flow) you shouldn't have any problems.

I hope that was a long enough answer, assuming I'm understanding your intent based on your two latest posts. The short answer is that you don't have to close your books in order to draw from owner's equity.  The transaction described above will create the appropriate record of your owner's draw. (No competent person is gonna look at your books and wonder where the money is going.  You might want to create an account specifically for this called Owner's Draw under an equity placeholder account.)

So what would you suggest to avoid closing the books and still being able to 
track drawings appropriately?

Thanks for all the help and advice so far... Hopefully once I finish my 
degree I will be able to help others a bit more :)

Cheers,


> Hi,
>
> On Sun, May 23, 2010 9:14 pm, Alex Hill wrote:
>> 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)?
>
> If you really really REALLY want to, then yes.  You could even use the
> Tools -> Close Books functionality to do it for you.  But keep in mind you
> cannot run reports across a book closing transaction, so you'd lose the
> ability to e.g. run a multi-year report.  YMMV.
>
> -derek
>
>>   ----- 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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