[GNC] new user, new file

[Michael or Penny Novack]

> In your example, you would not credit Equity ("my owner account") when
> you pay a bill. Crediting an equity account increases its balance, and
> you don't own anything more than you did before you paid the bill. Your
> equity in the business is the net of assets minus liabilities, but it's
> quite rare that you would make any transaction in an equity account
> directly. (The net of current-period income minus expenses is a special
> kind of equity, often called Retained Earnings.)

No, you are misunderstanding what equity is in this case.

He WOULD be increasing equity (of the business) by investing this 
additional amount (by personally paying a bill of the business)

Imagine that this were in TWO steps. Suppose he FIRST put the amount 
into the bank account of the business (the bank account that doesn't 
exist yet). Do you see that THIS (imaginary) transaction would be a 
debit to bank account (asset) and a credit to "owner's equity". He has 
invested this additional amount. Now SECOND, from this non-existent bank 
account he pays the bill. That's a debit to the appropriate expense 
account and a credit to the bank account.

The bank account doesn't exist yet but that's OK because we have a debit 
and a credit for the same amount (in this imaginary account) so those 
cancel out and it doesn't matter that no bank account (yet) We are left 
with a debit to the expense account and a credit to "owner's equity".

Michael D Novack