[GNC] Question about the accounting equation in the GnuCash guide

[Anselm Schüler]

Hi,

I’m reading the GnuCash guide that’s offered on initial launch of GnuCash.

The chapter The Basics introduces the accounting equation:
/Assets - Liabilities = Equity + (Income - Expenses)/
And I do not understand how it is intended to be understood.

If we understand equity as representing the total net wealth, 
aggregating the “settled” income in assets and the “in-flight” income 
then we can see that a simple test scenario
/Assets = $0
Liabilities = $0
Income = $5
Expenses = $0/
gives the absurd result of /Equity = -$5/. But if we instead take what 
the manual says earlier, that an increase in income is always paired 
with an increase in assets, by adjusting to /Assets = $5/, then we get 
the result that /Equity = $0/. This is similarly absurd, in my view. 
Shouldn’t we have /Equity = $5/?

It’s also unclear if liabilities and expenses should be negative numbers 
in the equation. If I spend $5, does that mean the equation is
/Assets - Liabilities = Equity + (Income - $5)/ (where expenses are 
denoted as positive values), or
/Assets - Liabilities = Equity + (Income + $5)/ (where expenses are 
denoted as negative values)?
If liabilities are not in lockstep with expenses, then this means that 
to get equity to behave intuitively, we’d need to treat liabilities as 
positive numbers, but expenses as negative numbers. If liabilities are 
in lockstep with expenses, then we either get /Equity = -$10/, or 
/Equity = $0/, which seem ridiculous.

So I simply do not understand how equity and the equation is to be 
understood. Could anybody help me here and clarify what is meant?