[GNC] Handling of Equity and Retained Earnings

[David Cousens]

Adrien

That is only true if in the new book all the transactions into Income and
Expense accounts (to and from Asset and Liability accounts) are also brought
into the new book (but why would you want to do that?) but if just the
balances of the Asset and Liability accounts are transferred to the new
book, then the Opening Balance entries in Equity automatically include the
Retained Earnings to that point implicitly since at the point of closure of
the old book we should have:

Assets - Liabilities =  Equity + (Income - Expenses) = Equity + Retained
Earnings

hence if we record the correct Asset and Liability balances with the second
splits to Equity:OpeningBalances
we are effectively transferring the value of Equity including the value of
retained Earnings to the point of closure into the new book. 

Hope this makes this a bit clearer.

David





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David Cousens
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