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Chapter 3
Chapter 4
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Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Chapter 28
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Chapter 2

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Closing the books

Generally accepted accounting practices  XE "closing the books"  XE "books, closing" carry income and expense accounts until the end of an accounting period (year or quarter, etc.)  Then all the income is added up, and all the expenses. Total income minus total expenses shows on the Profit and Loss Report as profit (we trust it will be a positive number.)  Effectively, the profit is added to the equity as Retained Earnings.  The classical accounting transactions are more complex. The balance in each income or expense account is transferred (directly or indirectly) to retained earnings XE "retained earnings:definition" .  QuickBooks basically does this, although not in the exact same manner as most accounting systems.

This is also where the balance in balance sheet comes in. Accounting tracks the changes in liabilities and assets, and also income and expenses.  If the changes in assets and liabilities match the income and expenses, the balance sheet will remain in balance.  The bean-counters can be justifiably proud of their work.

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Last modified: May 21, 2004