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

[Harold Hallikainen]

On Sat, August 16, 2025 2:12 pm, David Cousens wrote:
>
> The purpose of the arrangement of the accounting Equation in its usual
> form  Assets=Liabilities + Equity though is to define which accounts have
> debit balances (Assets) and which have credit balances (Liabities and
> Equity). In that form, it has nothing to do with the calculation of
> net worth.


As pointed out above, the form "Assets = Liabilities + Equity" properly
places assets on the left, and liabilities and equity on the right. One
accounting instructor once told me that Equity is another type of
liability. It is what the company owes the owners (or is the company's net
worth).

In a COBOL programming class, long ago (with punched cards!), we had to
design a simple accounting program. The instructor said "All you need to
know about accounting is that credit goes on the right since it has an R
in it." Of course, we often abbreviate debit as DR, but that's beside the
point!

The Assets = Liabilities + Equity is the form a balance sheet takes. As
pointed out earlier, equity is retained earnings (profit from previous
periods) plus profit from the current period. And profit for this period
is income for this period less expenses for this period.

I'm very impressed with double entry bookkeeping!

Harold


-- 
Not sent from an iPhone.