I think it may be TIMING which is confusing it - - - like this:
Keep in mind the basic fact that a Balance Sheet measures Assets
Liabilities + Equity as of a specific MOMENT - a POINT - in time.
But Income and Expense can only be measured OVER A PERIOD of time,
since they are MOVEMENTS of things of value. They can only be non-zero
over a PERIOD of elapsed time. They are, by definition, zero, at every
single MOMENT or POINT in time.
So A-L = EQ at every point in time. This is always so because by
definition these measurements (Assets, Liabilities, Equity) include all
Inc + Exp which have been recorded in all periods BEFORE that MOMENT or
POINT in time.
If you understand this, then perhaps you can see that dealing correctly
with TIMING is crucial, when you try to draw non-zero Inc+Exp into the
Balance Sheet equation - - because the equation deals only with MOMENTS
or POINTS in time.
So:
Starting with A-L=EQ (balance sheet) measured at the BEGINNING of a
PERIOD ...
You can only measure and add Inc + Exp recorded OVER a period (which
can be something more than zero ONLY over a period).
When you DO add Inc+Exp measured over a period, then you must "update"
the balance sheet tally's (A, L, EQ) to the END of that period, in
order for the balance sheet to still balance.
And when you do update A, L + EQ to the end of that period, by
definition Inc+Exp are zero AS OF THAT NEW END POINT in time ...
because these can only exist and be measured OVER A PERIOD of time.
So then going back to your original construction of the question:
(A+L) =/= [not equal] EQ+ (Inc+Exp) ...
This "still works" when you add or "force" non-zero Income + Expense
into the equation, ONLY when you deal logically and correctly with the
timing of that Inc+Exp:
(Assets-Liabilities at the END of a period) ... DOES in fact equal ...
[ (Equity at the BEGINNING of a period) + (Income - Expense OVER that
period) ]
So to summarize: the only way to add or include non-zero Inc+Exp into
the Balance Sheet equation, is:
1. to recognize the fact that Assets Liabilities + Equity are measured
AT A POINT in time,
2. while Income and Expense are measured OVER A PERIOD of time ...
3. then to re-construct or adjust the balance sheet equation with the
Asset, Liability, and Equity measurements at points in time that are
logically consistent with the period of time over which the
Income+Expense (which you're trying to add to this equation) were
measured.
This has logical integrity to it, so it keeps the equation balanced.
That is ... TIMING is the crucial "new" piece that you need to deal
with, as soon as you try to incorporate non-zero Inc + Exp into the
Balance Sheet equation.
Hope this helps.
Chris
__________________________________________________________________
From: [1]gnucash-user-requ...@gnucash.org
Sent: Monday, August 29, 2022, 12:00 PM
To: [2]gnucash-user@gnucash.org
Subject: gnucash-user Digest, Vol 233, Issue 86
Message: 1
Date: Sun, 28 Aug 2022 17:38:03 -0500
From: "W. Neal Lewis" [3]<wnle...@southwind.net>
To: [4]gnucash-user@gnucash.org
Subject: [GNC] Can someone tell me how A-L=Eq+(I-Ex) is correct?
Message-ID: [5]<75b5c885-4b07-d1e3-ccf3-6b5fb39cf...@southwind.net>
Content-Type: text/plain; charset=UTF-8; format=flowed
I will agree that by mathematical logic, Assets-(Liabilities)=Equity. ?
Assets+(Liabilites)-(Liabilities)=Equity+Liability, or stated more
simply, A=Eq+L. I have added Liability to both sides ? both sides remain
equal.
However, although (A+L)=Eq,
(A+L) =/= Eq+(Inc+Exp).
I have added a term to the right side that is most decidedly not on the left
therefor they cannot be equal.
Therefor A and L must be terms that include other factors.
Not good at accounting, I will ask what those other factors are.
I want to use GnuCash but I am having trouble getting my mind to accept
an equation that is not correct unless terms are redefined.
Please help me with my (obviously) incorrect understandings.
Thank you,
Neal Lewis
References
1. mailto:gnucash-user-requ...@gnucash.org
2. mailto:gnucash-user@gnucash.org
3. mailto:wnle...@southwind.net
4. mailto:gnucash-user@gnucash.org
5. mailto:75b5c885-4b07-d1e3-ccf3-6b5fb39cf...@southwind.net
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