On 2/15/2021 5:17 PM, Adrien Monteleone wrote:
(technically, Income & Expenses are 'temporary' Equity accounts, but
GnuCash gives them their own 'top-level' with Assets, Equity &
Liabilities. In the pen&paper days, you closed these out at the end of
the year to Retained Earnings, also an Equity account.)
Even more pedantic (from somebody who was first keeping books in those
days when it was pen and ink in paper) you FIRST closed the income and
expense accounts to a special (equity) account called "profit and loss"
and you closed THAT account with the net profit (or loss) to retained
earnings. The closed "profit and loss" account became your "Profit and
Loss" report.
Thus the expanded equation is:
Assets = Liabilities + Income - Expenses
Well ----------- Assets = Liabilities + Equity + Income - Expenses <
there really isn't any subtraction; expenses are debits and this is the
credit side of the equation>
Michael D Novack
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