[GNC] Handling of Equity and Retained Earnings

[Michael or Penny Novack]

On 1/15/2020 10:54 PM, David Cousens wrote:
> .......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
>
> .......
> Hope this makes this a bit clearer.
>
Assets = Liabilities + Equity is the fundamental equation

The "special" account types income and expense are temporary accounts of 
fundamental type equity. In other words, what shows on the Balance Sheet 
report as "retained earnings" is not the balance of some real account 
but the NET of all income and expense accounts. The net since the last 
time books were closed << so if you never close the books, from the 
beginning >>

Do not confuse this with when accounting for a corporations there will 
be a real account with a name like that as a child of equity and a close 
the books operation using that (instead of equity itself and ordinary 
dividends paid from this account << well transferred form this account 
to a "dividends" account when the directors declare the dividend >> 
Accounting for both regular corporations and pass through corporations 
(LLCs, S corporations, etc.) should be beyond the scope of this help list.

Michael D Novack