Questions About Balance Sheet and Income Statement

Mark Phillips mark at phillipsmarketing.biz
Sun Apr 7 11:28:38 EDT 2013


I think I figured it out. I just closed the books on 12/31/12 and put all
the expenses and income transactions into the opening balances for the
checkbook, and now on Jan 31 the retained earnings is equal to the profit
for the month of January.

Is that the correct way to handle the situation?

Thanks,

Mark

On Sun, Apr 7, 2013 at 7:50 AM, Mark Phillips <mark at phillipsmarketing.biz>wrote:

> James,
>
> Thanks for the clarification. It is now beginning to make sense. I have a
> transaction that relates to this issue and I am not sure if I entered it
> correctly.
>
> I started using gnucash just for my checkbook in 2011. I entered two
> months of data to get a snapshot income statement. I then stopped using it
> until Jan 2103. In order to reconcile the Jan 2013 statement I had to
> adjust the balance in the checkbook on Dec 31, 2012 to match what was on
> the bank statement. I did not want to enter all the past transactions in
> 2012. I created a fake transaction like this to bring the checkbook
> register to the right amount on Jan 1, 2013
>
> Assets:Checkbook credit $X
> Expenses: Adjustment debit $X
>
> Should I have done this instead?
>
> Assets:Checkbook credit $X
> Equity: Opening Balance checkbook debit $X
>
> It has a big impact on the retained earnings number.
>
> Or, should I delete all the 2011 and 2012 transactions, the above
> Adjustment to expense, and change the opening balance for the checkbook to
> be the correct value for 12/31/12?
>
> Thanks,
>
> Mark
>
> On Sun, Apr 7, 2013 at 12:19 AM, James Kerr <
> jim at jkerr82508.free-online.co.uk> wrote:
>
>> On 07/04/2013 1:41 AM, Mark Phillips wrote:
>>
>>> I am confused. I ran an income/expenses report for 1/1/13 - 1/31/13 and
>>> included all the income and expense accounts. I then ran a balance sheet
>>> for 1/31/13 and Assets = L + OE, as I would expect, but the Retained
>>> Losses
>>> = $4,270.76 and the Net Income on the income statement is $1,074.74
>>>
>>> 1. Shouldn't these two amounts be the same?
>>>
>>
>> No.
>>
>> Profit/Loss is for a specific period.
>>
>> Retained Earnings/Losses are the sum of all profits/losses since the
>> business began.
>>
>>
>>
>>> 2. How do I find out the reason for the difference?
>>>
>>>
>> Run a Balance Sheet at the preceding 12/31.
>>
>> Jim
>>
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