[GNC] retained earnings in balance sheet: where does it come from?

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[GNC] retained earnings in balance sheet: where does it come from?

Andrea Borgia
Hi.

While splitting a multi-year book, I saw that the (end of) 2016 balance
sheet has an entry called "retained earnings" with a value of 54.10.

A find-by-value gives me an entry in jan.2017 from an account which has
a tax-related flag set (and can't be changed, too): am I correct in
assuming the report is referring to this one? Also, why don't I see a
similar entry in the 2015 balance sheet for the corresponding 53.80
entry involving the same accounts?

More to the point: can I just safely ignore it?
After all, the total assets and the total equity match.

Thanks,
Andrea.
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Re: [GNC] retained earnings in balance sheet: where does it come from?

Adrien Monteleone-2
Retained Earnings is posted when you perform a close book operation. (or manually zero your income/expense accounts to Equity)

If you didn’t do this for 2015, there would be no entry.

If you performed the 2016 close book operation in Jan 2017, you’ll have a retained earnings entry in that month for the net income-expenses for 2016. If you were a non-individual entity, that amount would be the entity’s taxable income for the year, hence the tax flag. You probably want to fix that date to 12/31/16.

Regards,
Adrien

> On Mar 9, 2019, at 10:44 AM, Andrea Borgia <[hidden email]> wrote:
>
> Hi.
>
> While splitting a multi-year book, I saw that the (end of) 2016 balance sheet has an entry called "retained earnings" with a value of 54.10.
>
> A find-by-value gives me an entry in jan.2017 from an account which has a tax-related flag set (and can't be changed, too): am I correct in assuming the report is referring to this one? Also, why don't I see a similar entry in the 2015 balance sheet for the corresponding 53.80 entry involving the same accounts?
>
> More to the point: can I just safely ignore it?
> After all, the total assets and the total equity match.
>
> Thanks,
> Andrea.


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Re: [GNC] retained earnings in balance sheet: where does it come from?

Andrea Borgia
Il 10/03/19 01:19, Adrien Monteleone ha scritto:

> Retained Earnings is posted when you perform a close book operation.
> (or manually zero your income/expense accounts to Equity)
>
> If you didn’t do this for 2015, there would be no entry.
>
> If you performed the 2016 close book operation in Jan 2017, you’ll
> have a retained earnings entry in that month for the net
> income-expenses for 2016. If you were a non-individual entity, that
> amount would be the entity’s taxable income for the year, hence the
> tax flag. You probably want to fix that date to 12/31/16.

Hi, Adrien.

Thanks for the answer, however I think you got it backwards because I
didn't explain it properly: what I find interesting is that the report
shows a retained earnings value in the first place, whereas the entry
itself was made by me and it's a tax(*) recorded on the same day as the
bank statement (hence, correctly, in 2017).

So, I have the following entries:
14/01/2015: 53.80
20/01/2016: 53.80
13/01/2017: 54.10
18/01/2018: 54.00

54.10 showed up in the balance sheet for 2016, 53.80 did not show up for
2015.

Does this additional information still fit your explanation?


Thanks again,
Andrea.

(*) yeah, in Italy you pay a small percentage of your bank account
balance for the privilege of having a bank account. Funny place, I know.

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Re: [GNC] retained earnings in balance sheet: where does it come from?

Adrien Monteleone-2
Yes, sorry. I misunderstood your post.

The Balance Sheet Report does show a Retained Earnings line if you do not close books that is calculated as if you had. (which is why you don’t need to use that procedure, GnuCash doesn’t require you to close books as that is a procedure mostly dictated by physical paper constraints)

I thought you meant an actual account with that name, hence my previous post.

So the Balance Sheet is telling you the result of Income-Expenses for 2016 is 54.10.

The fact that this is also the same amount as this particular transaction you entered for 13/01/17 is purely coincidental. (and should be, since it is entered in 2017 and you are running a balance sheet as of 31/12/16, unless you *aren’t* setting that report date properly) Transactions after 31/12/16 (or whatever date you run your balance sheet for) are not part of the report calculation, so they can’t affect it.

2015 might not show that line, but that would mean your expenses match your income exactly for that year, an unlikely but not impossible scenario.

First, be certain of your report dates in the General Tab.

The ‘Retained Earnings/Loss’ line in the Balance Sheet should be equal to the ’Net Income/Loss’ for the same period on the Income Statement/P&L.

(that is what you would zero out to an actual ‘retained earnings’ account which is a child of Equity)

Your Net for 2016 should be 54.10.

Your Net for 2015 should be zero.

(assuming your Balance Sheet Report dates are 31/12/16 and 31/12/15 respectively)

> On Mar 10, 2019, at 3:58 AM, Andrea Borgia <[hidden email]> wrote:
>
> Il 10/03/19 01:19, Adrien Monteleone ha scritto:
>
>> Retained Earnings is posted when you perform a close book operation.
>> (or manually zero your income/expense accounts to Equity)
>> If you didn’t do this for 2015, there would be no entry.
>> If you performed the 2016 close book operation in Jan 2017, you’ll
>> have a retained earnings entry in that month for the net
>> income-expenses for 2016. If you were a non-individual entity, that
>> amount would be the entity’s taxable income for the year, hence the
>> tax flag. You probably want to fix that date to 12/31/16.
>
> Hi, Adrien.
>
> Thanks for the answer, however I think you got it backwards because I didn't explain it properly: what I find interesting is that the report shows a retained earnings value in the first place, whereas the entry itself was made by me and it's a tax(*) recorded on the same day as the bank statement (hence, correctly, in 2017).
>
> So, I have the following entries:
> 14/01/2015: 53.80
> 20/01/2016: 53.80
> 13/01/2017: 54.10
> 18/01/2018: 54.00
>
> 54.10 showed up in the balance sheet for 2016, 53.80 did not show up for 2015.
>
> Does this additional information still fit your explanation?
>
>
> Thanks again,
> Andrea.
>
> (*) yeah, in Italy you pay a small percentage of your bank account
> balance for the privilege of having a bank account. Funny place, I know.
>
>


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Liz
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Re: [GNC] retained earnings in balance sheet: where does it come from?

Liz
In reply to this post by Andrea Borgia
Andrea Borgia wrote:

> (*) yeah, in Italy you pay a small percentage of your bank account
> balance for the privilege of having a bank account. Funny place, I know.
>

If you have a negative balance do you pay a "negative" tax?
Liz

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Re: [GNC] retained earnings in balance sheet: where does it come from?

Andrea Borgia
Il 10/03/19 10:55, Liz ha scritto:

> If you have a negative balance do you pay a "negative" tax?
> Liz

I have never tried but I assume you simply would pay nothing.
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Re: [GNC] retained earnings in balance sheet: where does it come from?

Andrea Borgia
In reply to this post by Adrien Monteleone-2
Il 10/03/19 10:16, Adrien Monteleone ha scritto:


> The fact that this is also the same amount as this particular
> transaction you entered for 13/01/17 is purely coincidental. (and
> should be, since it is entered in 2017 and you are running a balance
> sheet as of 31/12/16, unless you *aren’t* setting that report date
> properly) Transactions after 31/12/16 (or whatever date you run your
> balance sheet for) are not part of the report calculation, so they
> can’t affect it.

I'm not a big fan of coincidences where lots of transactions are
involved and the difference matches just one of them.

I had made an error in the P&L calculation for 2016, meaning I had
included that amount as a loss instead of leaving it out. Now that am
splitting the file, I have fixed the mistake for 2016 already and 2017
is next in line.


> 2015 might not show that line, but that would mean your expenses
> match your income exactly for that year, an unlikely but not
> impossible scenario.

No, no, it's downright impossible: I am saving quite a bit each year but
I was closing the books (even before splitting) at the end of the year
so the balance sheet on dec.31st would show all zeroes... unless someone
with fat fingers had made an error and included an entry from the
following year :P

With one file per year, I saw that closing the books on jan.1st of the
following year would enable me to have a meaningful balance sheet and
that's what I'll be doing. That has the added bonus of being much easier
to carry over to the next year.


Last but not least, sorry if I mix up some terms: I am not an accountant
so, each time I want to ask a question, I have to re-run gnucash in
English to check whether the report I used in Italian is what I expect
it to be with an English label.


Regards,
Andrea.
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Re: [GNC] retained earnings in balance sheet: where does it come from?

Christopher Lam
In the balance sheet, retained earnings refer to total income minus
expenses on the report date.

On Thu., 14 Mar. 2019, 04:35 Andrea Borgia, <[hidden email]> wrote:

> Il 10/03/19 10:16, Adrien Monteleone ha scritto:
>
>
> > The fact that this is also the same amount as this particular
> > transaction you entered for 13/01/17 is purely coincidental. (and
> > should be, since it is entered in 2017 and you are running a balance
> > sheet as of 31/12/16, unless you *aren’t* setting that report date
> > properly) Transactions after 31/12/16 (or whatever date you run your
> > balance sheet for) are not part of the report calculation, so they
> > can’t affect it.
>
> I'm not a big fan of coincidences where lots of transactions are
> involved and the difference matches just one of them.
>
> I had made an error in the P&L calculation for 2016, meaning I had
> included that amount as a loss instead of leaving it out. Now that am
> splitting the file, I have fixed the mistake for 2016 already and 2017
> is next in line.
>
>
> > 2015 might not show that line, but that would mean your expenses
> > match your income exactly for that year, an unlikely but not
> > impossible scenario.
>
> No, no, it's downright impossible: I am saving quite a bit each year but
> I was closing the books (even before splitting) at the end of the year
> so the balance sheet on dec.31st would show all zeroes... unless someone
> with fat fingers had made an error and included an entry from the
> following year :P
>
> With one file per year, I saw that closing the books on jan.1st of the
> following year would enable me to have a meaningful balance sheet and
> that's what I'll be doing. That has the added bonus of being much easier
> to carry over to the next year.
>
>
> Last but not least, sorry if I mix up some terms: I am not an accountant
> so, each time I want to ask a question, I have to re-run gnucash in
> English to check whether the report I used in Italian is what I expect
> it to be with an English label.
>
>
> Regards,
> Andrea.
> _______________________________________________
> gnucash-user mailing list
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