[GNC] Getting My Account To Trial Balance

Adrien Monteleone adrien.monteleone at lusfiber.net
Thu Jul 26 04:16:34 EDT 2018


David,

I must admit, I knew about all of those cases, and my brain didn’t even register them. (I’m on a much simpler basis now, so generally don’t bother, or I just do the entries as I go.)

It’s been nearly 20 years since I dealt with a 13 period year, but for sure, that would be a good use case. (almost a necessity for sane P&L comparisons in the restaurant biz)

Of course, accruals, depreciation, yearly/quarterly expenses and such call for adjusting entries.

I don’t know what I was thinking, but thanks for the well articulated list. Sorry to take your time, but others will certainly benefit.

Regards,
Adrien

> On Jul 25, 2018, at 11:42 PM, DaveC49 <davidcousens at bigpond.com> wrote:
> 
> Adrien,
> 
> The main function of the trial balance is to ensure the accounts are
> numerically correct before any adjustments to the accounts are made before
> producing the final financial statements. It should be just a straight
> listing of the balance (credit or debit) of all accounts in the chart of
> accounts and the sum of all credits should equal the sum of all debits. 
> 
> This is usually the starting point for adjusting the accounts.  Closing the
> books is not just simply a transfer of the income and expenses for the
> accounting period to equity. Prior to this, the accounts may require
> specific adjustments which reflect the nature of the business and the
> particularly the taxation rules which apply to it. Even though GnuCash is a
> perpetual system it will require these adjustments to be made. This is also
> the function of what was a 13 month financial year in some accounting
> systems, in which the 13th virtual month was used to record and process
> these adjustments without affecting the data for the 12 actual months,  but
> was included in the current accounting period.
> 
> Adjustments are normally made for things which affect more than a single
> accounting period like prepaid expenses, depreciation of non-current assets,
> accrued expenses, accrued revenues and unearned revenues and the differences
> between accounts recorded on a cash (when the money is actually received or
> paid) or recorded on an accrual basis (when the income is earned (e.g. when
> a report is produced in a consulting business) or expenditure is incurred in
> an accounting sense in accordance with the matching principle) so that the
> correct income and expenses associated with earning it are recorded in the
> correct accounting period, mainly for taxation complliance. 
> 
> Not so important in personal accounting and usually many small businesses
> below a specified income/turnover level where cash accounting is allowed to
> be used for taxtaion purposes, but certainly significant for larger
> businesses which must use accrual accounting under taxation legislation. 
> 
> An example can be in something like manufacturing where you may purchase
> materials is one period (i.e. outlay the money) but you actually incur the
> expenditure in another accounting period (for example when you make the
> product) but the associated revenue may even be produced in a third or
> subsequent accounting period in which you sell the product.
> 
> David
> 
> 
> 
> 
> 
> -----
> David Cousens
> --
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