[GNC] How is A-L=Eq+(Inc-Exp) correct?

[Chris Skudder]

   I think it may be TIMING which is confusing it - - - like this:
   Keep in mind the basic fact that a Balance Sheet measures Assets
   Liabilities + Equity as of a specific MOMENT - a POINT - in time.
   But Income and Expense can only be measured OVER A PERIOD of time,
   since they are MOVEMENTS of things of value. They can only be non-zero
   over a PERIOD of elapsed time. They are, by definition, zero, at every
   single MOMENT or POINT in time.
   So A-L = EQ at every point in time. This is always so because by
   definition these measurements (Assets, Liabilities, Equity) include all
   Inc + Exp which have been recorded in all periods BEFORE that MOMENT or
   POINT in time.
   If you understand this, then perhaps you can see that dealing correctly
   with TIMING is crucial, when you try to draw non-zero Inc+Exp into the
   Balance Sheet equation - - because the equation deals only with MOMENTS
   or POINTS in time.
   So:
   Starting with A-L=EQ (balance sheet) measured at the BEGINNING of a
   PERIOD ...
   You can only measure and add Inc + Exp recorded OVER a period (which
   can be something more than zero ONLY over a period).
   When you DO add Inc+Exp measured over a period, then you must "update"
   the balance sheet tally's (A, L, EQ) to the END of that period, in
   order for the balance sheet to still balance.
   And when you do update A, L + EQ to the end of that period, by
   definition Inc+Exp are zero AS OF THAT NEW END POINT in time ...
   because these can only exist and be measured OVER A PERIOD of time.
   So then going back to your original construction of the question:
   (A+L) =/= [not equal] EQ+ (Inc+Exp) ...
   This "still works" when you add or "force" non-zero Income + Expense
   into the equation, ONLY when you deal logically and correctly  with the
   timing of that Inc+Exp:
   (Assets-Liabilities at the END of a period) ... DOES in fact equal ...
   [ (Equity at the BEGINNING of a period) + (Income - Expense OVER that
   period) ]
   So to summarize: the only way to add or include non-zero Inc+Exp into
   the Balance Sheet equation, is:
   1. to recognize the fact that Assets Liabilities + Equity are measured
   AT A POINT in time,
   2. while Income and Expense are measured OVER A PERIOD of time ...
   3. then to re-construct or adjust the balance sheet equation with the
   Asset, Liability, and Equity measurements at points in time that are
   logically consistent with the period of time over which the
   Income+Expense (which you're trying to add to this equation) were
   measured.
   This has logical integrity to it, so it keeps the equation balanced.
   That is ... TIMING is the crucial "new" piece that you need to deal
   with, as soon as you try to incorporate non-zero Inc + Exp into the
   Balance Sheet equation.
   Hope this helps.
   Chris
     __________________________________________________________________

   From: [1]gnucash-user-request at gnucash.org
   Sent: Monday, August 29, 2022, 12:00 PM
   To: [2]gnucash-user at gnucash.org
   Subject: gnucash-user Digest, Vol 233, Issue 86

Message: 1
Date: Sun, 28 Aug 2022 17:38:03 -0500
From: "W. Neal Lewis" [3]<wnlewis at southwind.net>
To: [4]gnucash-user at gnucash.org
Subject: [GNC] Can someone tell me how A-L=Eq+(I-Ex) is correct?
Message-ID: [5]<75b5c885-4b07-d1e3-ccf3-6b5fb39cfef0 at southwind.net>
Content-Type: text/plain; charset=UTF-8; format=flowed

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+(Inc+Exp).
I have added a term to the right side that is most decidedly not on the left
therefor they cannot be equal.

Therefor A and L must be terms that include other factors.

Not good at accounting, I will ask what those other factors are.

I want to use GnuCash but I am having trouble getting my mind to accept
an equation that is not correct unless terms are redefined.

Please help me with my (obviously) incorrect understandings.
Thank you,
Neal Lewis

References

   1. mailto:gnucash-user-request at gnucash.org
   2. mailto:gnucash-user at gnucash.org
   3. mailto:wnlewis at southwind.net
   4. mailto:gnucash-user at gnucash.org
   5. mailto:75b5c885-4b07-d1e3-ccf3-6b5fb39cfef0 at southwind.net