Expense account Balances

[Mike or Penny Novack]

commander_groo wrote:

>Hello,
>
>I'm new to gnucash and double entry accounting programs. I have one question
>about expense accounts that I haven't been able to find an answer to in the
>documentation.
>
>As I make expenses and the balance of the expense accounts continue to grow,
>are they just suppose to grow forever or do the balances reset to zero with
>the balances being transferred to somewhere else say on a monthly or yearly
>basis?
>
>Thanks
>  
>
If you are new to this, we'd better explain the history and the pros and 
cons.

Originally double entry bookkeeping was done pen and ink on paper as 
computers were hundreds of years in the future. This did not 
automatically supply a running balance. Early on it was discovered that 
more useful information would be had if instead of immediately posting 
income and expenses to equity they were first posted in TEMPORARY 
accounts (of fundamental type equity) called Income and Expense. Every 
so often (monthly, yearly) these would be closed to another temporary 
account of type equity called Profit and Loss. NOTE: by "close" I mean 
enter an amount such that when both sides are totaled the result is the 
same, a double line can be drawn across to indicate "in balance at this 
point" and you never go back past a double line when adding figures. 
Then the amount needed to close (to balance) Profit and loss would go to 
main equity as a gain or a loss for that time interval.

Enter the computer. Your books are now auto-posting, keep a running 
balance, can consider just what is within specified date ranges, and can 
produce reports like "Profit and Loss" (aka "Income Statement" or for my 
non-profits, "Statement of Revenues"). So you don't NEED to close the 
books. And has been pointed out, if you do close the books you need to 
be able to assign a date for that process on which you will have NO 
other transactions. For some of my organizations, the books get closed, 
but able to Jan 1st for the purpose treating Jan 1st as a day that is 
not in any year (so the "year" is Jan 2nd through Dec 31st).

If you can't afford to do that you will probably be better off NOT 
"closing the books". When viewing account totals without specifying a 
date range might be confusing but you will always be specifying some 
date range when running the "Income Statement" report (that shows 
expense totals as well as income totals -- they aren't REALLY different 
account types, just ones that usually have a debit balance (expense) vs 
those that usually have a credit balance (income).

Michael