On 1/15/2020 10:54 PM, David Cousens wrote:
.......but if just the
balances of the Asset and Liability accounts are transferred to the new
book, then the Opening Balance entries in Equity automatically include the
Retained Earnings to that point implicitly since at the point of closure of
the old book we should have:
Assets - Liabilities = Equity + (Income - Expenses) = Equity + Retained
Earnings
.......
Hope this makes this a bit clearer.
Assets = Liabilities + Equity is the fundamental equation
The "special" account types income and expense are temporary accounts of
fundamental type equity. In other words, what shows on the Balance Sheet
report as "retained earnings" is not the balance of some real account
but the NET of all income and expense accounts. The net since the last
time books were closed << so if you never close the books, from the
beginning >>
Do not confuse this with when accounting for a corporations there will
be a real account with a name like that as a child of equity and a close
the books operation using that (instead of equity itself and ordinary
dividends paid from this account << well transferred form this account
to a "dividends" account when the directors declare the dividend >>
Accounting for both regular corporations and pass through corporations
(LLCs, S corporations, etc.) should be beyond the scope of this help list.
Michael D Novack
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