Adrien, The main function of the trial balance is to ensure the accounts are numerically correct before any adjustments to the accounts are made before producing the final financial statements. It should be just a straight listing of the balance (credit or debit) of all accounts in the chart of accounts and the sum of all credits should equal the sum of all debits.
This is usually the starting point for adjusting the accounts. Closing the books is not just simply a transfer of the income and expenses for the accounting period to equity. Prior to this, the accounts may require specific adjustments which reflect the nature of the business and the particularly the taxation rules which apply to it. Even though GnuCash is a perpetual system it will require these adjustments to be made. This is also the function of what was a 13 month financial year in some accounting systems, in which the 13th virtual month was used to record and process these adjustments without affecting the data for the 12 actual months, but was included in the current accounting period. Adjustments are normally made for things which affect more than a single accounting period like prepaid expenses, depreciation of non-current assets, accrued expenses, accrued revenues and unearned revenues and the differences between accounts recorded on a cash (when the money is actually received or paid) or recorded on an accrual basis (when the income is earned (e.g. when a report is produced in a consulting business) or expenditure is incurred in an accounting sense in accordance with the matching principle) so that the correct income and expenses associated with earning it are recorded in the correct accounting period, mainly for taxation complliance. Not so important in personal accounting and usually many small businesses below a specified income/turnover level where cash accounting is allowed to be used for taxtaion purposes, but certainly significant for larger businesses which must use accrual accounting under taxation legislation. An example can be in something like manufacturing where you may purchase materials is one period (i.e. outlay the money) but you actually incur the expenditure in another accounting period (for example when you make the product) but the associated revenue may even be produced in a third or subsequent accounting period in which you sell the product. David ----- David Cousens -- Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.