[GNC] GNC Equity and Retained Earnings not tracking together?

[David Cousens]

Brian,

Brian the Retained Earnings is a component of the total Equity of the
business that records what the operation of the business has contributed to
the Equity. When a distribution is paid it is paid out of Equity and if it
is debited to the Shareholder Distributions and credited to the Asset:Bank
account then it has decreased the Equity appropriately. If you were to also
debit it from Equity:Retained Earnings what is the other account for the
debit side of the transaction? You will have decreased the equity twice for
the one distribution to the shareholders and Retained Earnings will no
longer reflect the operational contribution to the Equity of the business. 
The shareholder distribution is not part of the operational aspect of the
business but a part of its capital/financing structure.

David Cousens



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David Cousens
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