[GNC] Can someone tell me how A-L=Eq+(I-Ex) is correct?

[Michael or Penny Novack]

On 8/28/2022 6:38 PM, W. Neal Lewis wrote:
> I will agree that by mathematical logic, Assets-(Liabilities)=Equity. 
> ∴ Assets+(Liabilites)-(Liabilities)=Equity+Liability, or stated more 
> simply, A=Eq+L. I have added Liability to both sides ∴ both sides 
> remain equal.
>
> However, although (A+L)=Eq, (A+L)≠Eq+(I+Ex). I have added a term to 
> the right side that is most decidedly not on the left ∴ they cannot be 
> equal.

Income and expenses are of fundamental type equity (they just haven't 
yet been combined with equity). They are also of opposite sense. 
Expenses are debit and Income is credit. When you add income to equity, 
you are increasing equity (equity is of sense credit). But when you add 
expenses to equity you are decreasing equity (because the sense of 
expenses is debit.

Assets = Equity + Liabilities   << the fundamental equality at the start >>

Now at the start, there are yet no items of income or expense, so those 
totals are zero. So no violation of anything if we add zero twice to the 
right hand side.

Assets = Equity + liabilities + Income - Expenses    << that's just 
Assets = Equity + Liabilities + (0) - (0)   and we are always allowed to 
add or subtract zero, no violation yet >>

We will now look at two transactions, one for an item of income of x and 
one for an item of expense of y. When we enter the item of income we 
would be debiting an asset account by x and crediting an income account 
by y. So ......

Assets + x = Equity + Liabilities + (0 + x) - (0)

And when we pay an expense of y we will be debiting an expense account 
by y and crediting an account of type asset by y  But remember, the 
normal sense of assets is debit and the normal sense of expenses is 
debit. Sp ....

Assets + x -y = Equity + Liabilities + (0 + x) - (0 + y)

OK now?

Michael D Novack