[GNC] Equity Account "problem"

[Default User]

On Sun, 2023-07-16 at 13:50 -0500, Adrien Monteleone wrote:
> On 7/12/23 10:53 AM, Default User wrote:
> > ... I understand that the fundamental accounting equation
> > is, of course:
> > 
> > Assets - Liabilities = Equity
> 
> No, and if you answered that on a test, it would be marked wrong.
> 
> While the math works out and equations can be manipulated (as is the 
> case with your example above), the *Fundamental* Accounting Equation
> is:
> 
> Assets = Liabilities + Equity
> 
> This is a system of Balance. Writing the equation correctly describes
> how the system is designed.
> 
> There is a Left Side that is Equal to the Right Side.
> 
> Debit is on the Left.
> Credit is on the Right.
> 
> Debit = Credit
> 
> Assets are normally Debit balanced.
> Liabilities & Equity are normally Credit balanced.
> 
> You can expand the equation to include the temporary accounts Income
> & 
> Expenses, and being contributions to Equity, they belong on the Right
> or 
> Credit side of the equation:
> 
> Assets = Liabilities + Equity + (Income - Expenses)
> 
> Notice the (-) sign in front of Expenses. This indicates it is a
> 'contra 
> balanced' account, and since it is on the Right side of the equation 
> that means it is normally has the opposite balance of its side
> (Credit), 
> thus it normally has a Debit balance.
> 
> You can further manipulate the equation so all Debit balanced
> accounts 
> are on the left, and only Credit balanced accounts are on the right:
> 
> Assets + Expenses = Liabilities + Equity + Income
> 
> This is all right out of a basic accounting textbook.
> 
> There are many online, and every local library will likely have one
> too.
> 
> Regards,
> Adrien
> 
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Hi, Adrien!

Thanks for the explanation.  I appreciate it!

:)