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

[Adrien Monteleone]

Just for the record,

That should be a reduction of cash *and* a reduction of ’Shareholder distribution’, not an increase. You aren’t increasing your liability by paying it down.

Dr. Liability:Shareholder Distribution
Cr. Cash

The liability is increased via a transaction with Retained Earnings.

Dr. Equity:Retained Earnings
Cr. Liability:Shareholder Distribution

Research Dividends transactions for corporate accounting. You’ll find the appropriate accounts needed and how to structure the transactions. (better yet, speak to a local CPA!) I think the general term for your ’Shareholder Distribution’ is ‘Dividends Payable’ or ‘Dividends Declared’ (which might be a separate account)

Some also simply make those distribution accounts as contra-equity accounts under Retained Earnings or Shareholder’s equity and don’t involve liability accounts at all. It depends on the nature of the payment.

You can have an actual Retained Earnings account along with not closing the books, but you may wish instead to close the books. Otherwise, you’ll have two Retained Earnings lines on your balance sheet (one as net-income, one as actual account) which will require you to export to spreadsheet, combine them, then print. An improvement to the current report would be to add the balance of the real account to the net-income calculation.

Regards,
Adrien



> On Mar 10, 2020 w11d70, at 10:27 AM, Brian via gnucash-user <gnucash-user at gnucash.org> wrote:
> 
>> On Tue, 10 Mar 2020 at 01:02, Brian via gnucash-user <
>> gnucash-user at gnucash.org> wrote:
>> 
>>> I'm wondering if GNUCash is actually calculating RETAINED EARNINGS
>>> properly.  Because after issuing a distribution to shareholder the
>>> Retaining Earning calculation increased by Net Income but did not
>>> decrease by Asset:Cash which was debited and credited to
>>> Equity:Shareholder Distribution.
>>> 
>> 
>> The calculation of Retained Earnings and Unrealized Gains in the
>> Balance Sheet is rather primitive, and has been as such since nearly
>> forever.
>> 
>> Retained Earnings = sum total of income less expenses at the
>> balance-sheet date.
>> Unrealized Gains = sum total of (asset-liability) value, minus sum
>> total of (asset-liability) cost.
> 
> Christopher, then I believe you are saying to get a proper "retained
> earnings", which recognizes the reduction of Assets:Cash and increase to
> Liability:Shareholder distribution, that one would need to properly
> close the books by moving income and expense to a Liability:Retained
> Earnings sub-account?