[GNC] General accounting question about Assets = Liabilities + Equity

Brandon Captain caibbor at gmail.com
Tue Jan 14 12:38:20 EST 2020


Hello,

I have a rather general accounting question in regards to the Assets =
Liabilities + Equity formula, and how it relates to the other GNUCash
default accounts like Income and expenses. Those accounts are neither
assets, liabilities, nor equity. So I'm not sure how to factor them in -
unless Income is an asset? Then why isn't it listed as a sub-account of
Assets?

Take the following accounts for example:

assets (debit) 209.01
income (credit) 22975.27
liabilities (credit) 1497.72
expenses (debit) 5445.24
equity (credit): -18818.74

(Equity breaks down as 3863.47 in contributions and -22682.21 in draws)

If you add all the debits together, it comes out to 5654.25. Likewise, if
you add all the credits together, you get the same figure of 5654.25 (which
as I understand means that it balances).

But assets = liabilities + equity would be ( 209.01 = 1497.72 + -18818.74 )
which just... doesn't work. Not without the other accounts in the figure,
and not without reversing the signs since 1497.72 is actually -1497.72 in
reality, and so forth.

I'd appreciate any explanation on this. I've Googled and researched a bit
but there's something I'm still not quite understanding.

Thank you


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