End of financialyear

[Egbert van der Wal]

On 25/11/13 15:22, Mike or Penny Novack wrote:
>
> And considered as if it were a ledger account, what sort of account 
> (fundamental type) do you think "retained earnings" would be?
That'd be equity too, I agree. However, that's for one year. If you have 
a balance overview at, for example, 1-1-2013, with a sum of retained 
earnings, that makes sense to show up. However, when you want to compare 
this with the balance you'll generate at 1-1-2014, IMHO it makes more 
sense to have the retained earnings balance at 1-1-2013 moved to the 
equity account, so that the retained earnings amount actually reflects 
on the past year instead of on the entire accounting history.

Also, 'Retained Earnings' actually shows up twice: it's there once as a 
true account, available from the chart of accounts. The balance of this 
on the Balance Sheet reflects the true balance of this account. Then 
there's another 'Retained Earnings', which is some kind of meta-account 
that is dynamically calculated based on the Income and Expenses accounts.

The difference could be that the real 'Retained Earnings' account is the 
total amount available to share holders, while the second is the result 
of the past accounting period. However, to achieve this distinction, 
this means that you have to transfer the Income/Expenses balance to the 
Retained Earnings account, which is basically the same that the 'Close 
books' function does for you.

So, then, how would you maintain the overview without closing books?

Best regards,

Egbert van der Wal