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Equity Accounts.
On the Jewelry Shopkeeper balance sheet, the Total
Equity is the calculated balance of Assets minus
Liabilities. The Retained Equity is the difference
between the Total Equity as calculated above and any
individual equity accounts that you might have posted.
Example: If you have Total Assets of $100 and Total
Liabilities of $60, the Total Equity is calculated to
be $40. Now, if you have created equity accounts
(beginning with 3) such as Retained Earnings As of
12/31/9x for a figure of $17 and you have a Common
Stock Dividends of $5, then you have itemized equity
accounts totalling $22. The Retained Equity is then
calculated as Total Equity minus Itemized Equity = $40
minus $22 = $18
If in the above example, you did not have any values in
any Itemized Equity accounts, then the Retained Equity
would equal the Total Equity.
Having worked with smaller business, the Jewelry Shopkeeper is
very flexible (perhaps too flexible for some) and can allow
single-entries (e.g., adjustments to inventory, sales without
deposits, etc) For our customers who appreciate some of the
formality between the income statement and the balance sheet we
suggest the following.
1) Force the income statement and the balance sheet to agree as
of a given date. (adjusting entry to retained earnings, assets,
liabilities, opening inventory, something else)
2) Run the income statement and balance sheet daily to check for
correlation.
3) When you come across a day that does not match, review the
dayþs activity for the transaction that probably cause the
mismatch and make a correction. If you are unable to discover the
cause of the mismatch yourself, you may wish to discuss it with
us.
4) Within some months, you should have encountered most of the
types of transactions which cause mismatches and subsequently
learn how to handle them in a balanced fashion.