[GNC] How is A-L=Eq+(Inc-Exp) correct?
Michael or Penny Novack
stepbystepfarm at comcast.net
Mon Aug 29 20:42:02 EDT 2022
On 8/29/2022 12:59 PM, Chris Skudder wrote:
> 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.
Correct
> 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.
No, the NET of all income and expense accounts appears on the Balance
Sheet as "unrealized gains" (or losses) << there is no actual account
with that name >> The accounts of type income and type expense are
temporary accounts of fundamental type equity (they would be closed to
equity by a "close the books" operation. At that moment in time for
which the Balance Sheet is run there IS a well defined net.
Note that in the old days, it was the process of "closing the books"
that produced the "Statement of Income and Expenses" (aka "Profit and
Loss") on the form of another temporary account of fundamental type
equity into which the individual income and expense accounts were
closed, and the amount to bring this account to zero (a net gain or
loss) entered here and to equity.
It is because gnucash can produce this report without closing the books
that most of us don;t bother with that.
Michael D Novack.
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