On 3/24/2018 4:56 PM, Buddha Buck wrote:
In general, I wouldn't bother entering starting balances for income and
expense accounts from before the period I am accounting for. Traditionally,
those accounts were temporary, and at the end of the accounting period the
balances would be reset to zero, being transferred to equity.
THAT, if you look closely, is the explanation for the (apparently odd)
reduction in equity IF you were entering balances for income (and
expense) at the start of the books. Accounts of type income and expense
are temporary accounts of fundamental type equity. So if you had begun
starting your books with balances in income and equity (say transferring
in data from another method of accounting you should expect this result.
Yes, entering a balance for income WOULD reduce equity. Or rather,
represents a TRANSFER between permanent equity and temporary equity <<
would be returned to equity by a close the books operation >>
That said, it is usual to start a set of books JUST from the balance
sheet with income and expense zero.
Michael D Novack
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