Retained Earnings

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Retained Earnings

Cam Ellison-2
This shows up as a calculated amount in the Balance Sheet report.
Where does it come from?  I notice that the Retained Earnings figure
for the last fiscal year is the sum of the RE and the Net Profit for
the previous year, which was the first year of operation.

My accountant is wondering, and I'm confused.

Thanks

Cam


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Cam Ellison & Associates Ltd.
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Re: Retained Earnings

David Harrison-2
On 22/11/05, Doctorcam <[hidden email]> wrote:
> This shows up as a calculated amount in the Balance Sheet report.
> Where does it come from?  I notice that the Retained Earnings figure
> for the last fiscal year is the sum of the RE and the Net Profit for
> the previous year, which was the first year of operation.

The short answer is retained earnings is the accumulated earnings of
the company since it's inception.  Here's an example:

Year 1 - Net income of $1,000
          - Retained earnings at the end of the year = 0 + $1,000

Year 2 - Net loss of $100
          - Retained earnings at the end of the year = $1,000 - $100 = $900

Year 3 - Net income of $200
          - Retained earnings at the end of the year = $900 + $200 = $1,100

and so on.
>
> My accountant is wondering, and I'm confused.

I'd be worried if your accountant doesn't know what retained earnings are!!

>
> Thanks
>
> Cam
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Re: Retained Earnings

Derek Atkins
In reply to this post by Cam Ellison-2
The Balance Sheet in 1.8 is a little confusing.  The version in SVN is
better. Basically, the retained earnings computation is trying to mimic
the "closing
the books" by computing the Income and Expense differences between the
time the
balance sheet is run and the time the books would have been "closed" as Net
Profit, and the values at that time as the Retained Earnings.

In other words, it's computing what would happen if you zeroed out your Income
and Expense accounts at the start of the period.

-derek

Quoting Doctorcam <[hidden email]>:

> This shows up as a calculated amount in the Balance Sheet report.
> Where does it come from?  I notice that the Retained Earnings figure
> for the last fiscal year is the sum of the RE and the Net Profit for
> the previous year, which was the first year of operation.
>
> My accountant is wondering, and I'm confused.
>
> Thanks
>
> Cam
>
>
> --
> Cam Ellison  Ph.D.  R.Psych. #01417
>
> Cam Ellison & Associates Ltd.
> Management Psychology
>
> RR 22    3446 Beach Avenue
> Roberts Creek  BC  V0N 2W2
>
> Phone: 604-885-4806
> Fax:   604-885-4809
>
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>



--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available

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Re: Retained Earnings

Cam Ellison-2
In reply to this post by David Harrison-2
* David Harrison ([hidden email]) wrote the following:
> On 22/11/05, Doctorcam <[hidden email]> wrote:
> > This shows up as a calculated amount in the Balance Sheet report.
> > Where does it come from?  I notice that the Retained Earnings figure
> > for the last fiscal year is the sum of the RE and the Net Profit for
> > the previous year, which was the first year of operation.
>
> The short answer is retained earnings is the accumulated earnings of
> the company since it's inception.

Thank you, but that wasn't the question.  Both my accountant and I
understand retained earnings.  What we wanted to know, and Derek was
good enough to supply the answer, was where Gnucash's built-in Balance
Sheet gets the numbers from and what it actually does with them.  With
no built-in facility for year-end closing, we have created a Retained
Earnings child account, so the built-in one is merely a source of
annoyance.

Anyway, thank you to Derek for his clarification.

Cheers

Cam

--
Cam Ellison  Ph.D.  R.Psych. #01417

Cam Ellison & Associates Ltd.
Management Psychology

RR 22    3446 Beach Avenue
Roberts Creek  BC  V0N 2W2

Phone: 604-885-4806
Fax:   604-885-4809

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Re: Retained Earnings

Cam Ellison-2
In reply to this post by Derek Atkins
* Derek Atkins ([hidden email]) wrote the following:

> The Balance Sheet in 1.8 is a little confusing.  The version in SVN is
> better. Basically, the retained earnings computation is trying to mimic
> the "closing
> the books" by computing the Income and Expense differences between the
> time the
> balance sheet is run and the time the books would have been "closed" as Net
> Profit, and the values at that time as the Retained Earnings.
>
> In other words, it's computing what would happen if you zeroed out your
> Income
> and Expense accounts at the start of the period.
>

Thank you for this.  It's more or less what I expected, but I am too
lazy to go poking through other reports.

Your explanation might imply that somehow any activity between the
"closed" date, and the subsequent date on which the report is actually
run, is included. I assume that is not true, and that you are referring
to the "From" and "To" dates, the latter being the "closed" date.

When I run last year's Balance Sheet, which started with both Income
and Expenses at $0.00, the RE figure is a not-insignificant negative
amount.  Your explanation suggests that gnucash should be calculating
a positive value for RE (since Income was greater than Expenses).  Am
I missing something here - like a sign reversal?

I think that because we set up a split to zero both Income and
Expenses on the last day of the FY, in order to close properly, we end
up with a figure that relates to the rest in a non-obvious way.

I'm looking forward to 2.0  :-)  Do you still expect a December
freeze and roll-out, or are we looking at the New Year?  Or should I
piss off and quit asking unanswerable questions? ;-^)

Thanks - and for everything you do on this package

Cam

--
Cam Ellison  Ph.D.  R.Psych. #01417

Cam Ellison & Associates Ltd.
Management Psychology

RR 22    3446 Beach Avenue
Roberts Creek  BC  V0N 2W2

Phone: 604-885-4806
Fax:   604-885-4809

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Re: Retained Earnings

Derek Atkins
Retained Earings is computed from the start to the "From" Date.
Net Profit is computed from the "From" date to the "To" date.

-derek

Quoting Doctorcam <[hidden email]>:

> Thank you for this.  It's more or less what I expected, but I am too
> lazy to go poking through other reports.
>
> Your explanation might imply that somehow any activity between the
> "closed" date, and the subsequent date on which the report is actually
> run, is included. I assume that is not true, and that you are referring
> to the "From" and "To" dates, the latter being the "closed" date.
>
> When I run last year's Balance Sheet, which started with both Income
> and Expenses at $0.00, the RE figure is a not-insignificant negative
> amount.  Your explanation suggests that gnucash should be calculating
> a positive value for RE (since Income was greater than Expenses).  Am
> I missing something here - like a sign reversal?
>
> I think that because we set up a split to zero both Income and
> Expenses on the last day of the FY, in order to close properly, we end
> up with a figure that relates to the rest in a non-obvious way.
>
> I'm looking forward to 2.0  :-)  Do you still expect a December
> freeze and roll-out, or are we looking at the New Year?  Or should I
> piss off and quit asking unanswerable questions? ;-^)
>
> Thanks - and for everything you do on this package
>
> Cam
>
> --
> Cam Ellison  Ph.D.  R.Psych. #01417
>
> Cam Ellison & Associates Ltd.
> Management Psychology
>
> RR 22    3446 Beach Avenue
> Roberts Creek  BC  V0N 2W2
>
> Phone: 604-885-4806
> Fax:   604-885-4809
>
> _______________________________________________
> gnucash-user mailing list
> [hidden email]
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
>



--
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
       [hidden email]                        PGP key available

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Re: Retained Earnings

Cam Ellison-2
* Derek Atkins ([hidden email]) wrote the following:
> Retained Earings is computed from the start to the "From" Date.
> Net Profit is computed from the "From" date to the "To" date.

That is interesting.  If the start is the "From" date, what then?

Cheers

Cam

--
Cam Ellison  Ph.D.  R.Psych. #01417

Cam Ellison & Associates Ltd.
Management Psychology

RR 22    3446 Beach Avenue
Roberts Creek  BC  V0N 2W2

Phone: 604-885-4806
Fax:   604-885-4809

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Re: Retained Earnings

Cam Ellison-2
* Doctorcam ([hidden email]) wrote the following:
> * Derek Atkins ([hidden email]) wrote the following:
> > Retained Earings is computed from the start to the "From" Date.
> > Net Profit is computed from the "From" date to the "To" date.
>
> That is interesting.  If the start is the "From" date, what then?

Never mind - answered my own question: $0

Cam


--
Cam Ellison  Ph.D.  R.Psych. #01417

Cam Ellison & Associates Ltd.
Management Psychology

RR 22    3446 Beach Avenue
Roberts Creek  BC  V0N 2W2

Phone: 604-885-4806
Fax:   604-885-4809

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