John, Do you even realize what you've typed? > Sorry, you're wrong on both points.
Apparently you're also implying that not just me, but the whole accounting ecosystem is wrong because we all believe that Retained Earnings is net income minus dividend payments. > GnuCash doesn't care about the dividend payment, it's up to the user--i.e. > you--to set up your Accounts correctly and make the dividend payments with > the right account. It has to care, else don't call it an accounting software, period! Do you not realize that there is no 'right account' in GnuCash for dividends? If you put is as expense that's technically wrong, if you put it as equity, the Retained Earnings calculations ignores it. Isn't that the whole gist of my emails - that we make one or find a better solution? Brainstorm, discuss potential solutions, see what we can do for next release to fix it instead of being defensive? The two explanations you gave doesn't fix the issue - a) You asked to close the books which will put the money into Retained Earnings. The problem with this solution is that it forces the user to close the books when he doesn't have to. Even if you ignore that, the solution doesn't take care of dividends. Dividends don't get adjusted to Retained Earnings because you still define Retained Earnings as total income - total expenses at a particular date. Well, that equation gives you total net income, not retained earnings. Simple accounting formulas. Maybe the naming system is wrong as mentioned by Frank. b) You asked to make an expense statement to record dividends. Well, that's the workaround we all are using at the moment, and everyone who replied to this thread did say that. I am merely suggesting that we find a proper solution to this because using an expense account for dividends is just technically wrong. >If you need an accounting program that handles it automagically, GnuCash isn't >the right solution for you. I don't need an automatic thing! No one is talking about handling dividends automatically. Dividends can be arbitrary and this very nature makes it impossible to automate it. I am talking about the right tools (accounts) to record dividends when they are declared. To metaphorize, We need a hammer to hammer a nail and you're saying, "Sorry, that's just unnecessary, we have an axe, hold the head sideways and hit the nail with that. It should work!". I am just wondering what others in the list thinks of this issue. Should we work on it, or just let it be? - Regards, Justin Mathew mjus...@protonmail.com Sent with ProtonMail Secure Email. - Regards, Justin Mathew mjus...@protonmail.com Sent with ProtonMail Secure Email. ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ On Wednesday, April 17, 2019 3:06 AM, John Ralls <jra...@ceridwen.us> wrote: > Justin, > > Sorry, you're wrong on both points. GnuCash doesn't care about the dividend > payment, it's up to the user--i.e. you--to set up your Accounts correctly and > make the dividend payments with the right account. I've explained twice now > how to do that, I won't again. If you need an accounting program that handles > it automagically, GnuCash isn't the right solution for you. > > Regards, > John Ralls > > > On Apr 16, 2019, at 12:30 PM, Justin Mathew mjus...@protonmail.com wrote: > > John, > > > > > It's not a workaround, it's a choice. Either you close your books or you > > > don't. If you do then you close to a Retained Earnings account and all is > > > good. If you don't then GnuCash calculates your retained earnings for you > > > and all is good. At present if you mix the two then you get two "Retained > > > Earnings" lines in your report unless you name the account something > > > else. So don't mix them. > > > > I was referring to the use of 'Expense' accounts for dividend payments as > > workaround. Not the choice of closing or continuing the books which is of > > course a choice. > > Anyway, I have spent enough time putting my point across. Let me summarize > > what Frank and I meant in two bullet points. > > a) 'Retained Earnings' is your net income minus your dividends paid in > > general accounting terms. In GnuCash it means something else. > > b) GnuCash doesn't handle the dividend payment the technically correct way. > > Dividends should decrease the equity and gets balanced out. > > Only if b is fixed, can a be fixed. And no, this is not just pedantry! I > > wish you can see the seriousness in this issue. > > If it's a bug, users can wait for the fix in the next release, but if it's > > a flaw in design which isn't acknowledged, there is little that users can > > do. > > Thank you all. I know you'll do what's good for the software. > > > > - > > > > Regards, > > Justin Mathew > > mjus...@protonmail.com > > Sent with ProtonMail Secure Email. > > ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ > > On Wednesday, April 17, 2019 12:28 AM, John Ralls jra...@ceridwen.us wrote: > > > > > Justin, > > > It's not a workaround, it's a choice. Either you close your books or you > > > don't. If you do then you close to a Retained Earnings account and all is > > > good. If you don't then GnuCash calculates your retained earnings for you > > > and all is good. At present if you mix the two then you get two "Retained > > > Earnings" lines in your report unless you name the account something > > > else. So don't mix them. > > > If someone was so inclined GnuCash could handle a middle way to combine > > > the calculated retained earnings with a designated (by report option, I > > > suppose) retained earnings account and report it on a single line, but > > > frankly I don't see much reason for that beyond pedantry. > > > Regards, > > > John Ralls > > > > > > > On Apr 16, 2019, at 9:31 AM, Justin Mathew mjus...@protonmail.com wrote: > > > > From what I have seen on GnuCash, we can generate profit loss statement > > > > for a fiscal year without closing the books. And therefore we can > > > > determine the dividends to be paid without closing the books. And > > > > anytime you generate a balance sheet, 'Retained Earnings' are > > > > mentioned. So we don't need to close any books to generate these > > > > figures. > > > > If you calculate 'Retained Earnings' as your net income minus dividends > > > > for that fiscal year, don't we credit the 'Retained Earnings' account > > > > without closing the books? > > > > > > > > > On the other hand, if you want to never close your books just create > > > > > an expense account for dividends and exclude it from the various > > > > > Expense reports and the Income Statement (aka Profit & Loss) report. > > > > > That's not formally correct, but the result is the same. > > > > > > > > I know this workaround, it was discussed in the user mailing list > > > > itself. The reason of this thread is to find a fix to this issue at > > > > least for the next release. > > > > If we bring in a Dividend type account under Equity we can debit > > > > dividend declarations to this account. We don't have to credit this > > > > account by the way. The account will be in minus with red font as in > > > > current version. The balance in this account will be transferred to net > > > > account resulting in the proper 'Retained Earnings'. > > > > Eg, total net income = $50,000 > > > > Dividends are declared = $25,000 to be paid to shareholders > > > > Dividend Declared account in Equity will show -$25,000 since it is only > > > > debited. > > > > Retained Earnings = Net income + Dividend Declared = 50000+ (-20000) = > > > > 30000 > > > > When you calculate 'Retained Earnings' the way it should be calculated, > > > > it gives the accurate number whether the books are closed or not. > > > > GnuCash has to work accurately with all businesses whether small or > > > > big, instead of using workarounds. > > > > > > > > - > > > > > > > > Regards, > > > > Justin Mathew > > > > mjus...@protonmail.com > > > > Sent with ProtonMail Secure Email. > > > > ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ > > > > On Tuesday, April 16, 2019 8:13 PM, John Ralls jra...@ceridwen.us wrote: > > > > > > > > > The Retained Earnings part of the Balance Sheet report was written > > > > > with that in mind. > > > > > The automatic calculation of retained earnings in the Balance Sheet > > > > > report nets out the income and expense accounts; if there's a > > > > > Retained Earnings account it will get reported too. Since the way to > > > > > credit Retained Earnings (an Equity account) is to close the books, > > > > > debiting all of the income and expense accounts by their balances and > > > > > crediting Retained Earnings. Now income and expense are 0 and the > > > > > calculated Retained Earnings line won't appear. You can treat its > > > > > appearance as a reminder that you haven't closed the books yet. > > > > > On the other hand, if you want to never close your books just create > > > > > an expense account for dividends and exclude it from the various > > > > > Expense reports and the Income Statement (aka Profit & Loss) report. > > > > > That's not formally correct, but the result is the same. > > > > > Regards, > > > > > John Ralls > > > > > > > > > > > On Apr 16, 2019, at 7:22 AM, Christopher Lam > > > > > > christopher....@gmail.com wrote: > > > > > > Oops. My mistake: The "Retained Earnings" part in GnuCash's > > > > > > Balance-sheet > > > > > > has not been written with that in mind by the original report > > > > > > writers. > > > > > > Amendments to reports are possible but please submit an enhancement > > > > > > in > > > > > > bugzilla. > > > > > > Ideally with an suitable chart of accounts, with some sample > > > > > > real-life > > > > > > transactions. > > > > > > On Tue, 16 Apr 2019 at 14:04, Justin Mathew mjus...@protonmail.com > > > > > > wrote: > > > > > > > > > > > > > Christopher, > > > > > > > > > > > > > > > The "Retained Earnings" part of the Balance Sheet has nothing > > > > > > > > to do with > > > > > > > > dividends. > > > > > > > > IIUC on the balance sheet date X, the retained earnings simply > > > > > > > > means the > > > > > > > > total income up to date X, minus total expenses up to date X. > > > > > > > > > > > > > > Don't get me wrong, the 'retained earnings' anywhere in > > > > > > > accounting (not > > > > > > > just in the balance sheet) should have everything to do with > > > > > > > dividends. > > > > > > > It's the accounting definition that 'Retained earnings' is the > > > > > > > business' > > > > > > > net income - cash/stock dividends. > > > > > > > The definition of 'total income minus total expenses' works only > > > > > > > for sole > > > > > > > proprietorships where the business isn't a legal entity in it's > > > > > > > own right. > > > > > > > A registered business, however small it is will have at least one > > > > > > > shareholder. Most small businesses will have more than one from > > > > > > > what I have > > > > > > > seen. > > > > > > > > > > > > > > > From your description of 'owning a company with shares' / > > > > > > > > 'selling > > > > > > > > shares of company' / 'issuing dividends' I honestly have no > > > > > > > > idea how the > > > > > > > > books should look like, nor which chart of accounts should > > > > > > > > apply, nor > > > > > > > > whether the GnuCash reports are appropriate to produce useful > > > > > > > > reports. > > > > > > > > > > > > > > Oh yes, GnuCash should be able fit in all business, because they > > > > > > > all > > > > > > > follow the same accounting principles. All we need to do is to > > > > > > > calculate > > > > > > > 'Retained Earnings' as per the standard accounting formula - it > > > > > > > should > > > > > > > account for dividends paid. > > > > > > > Understanding which transactions are dividends to account for is > > > > > > > a problem. > > > > > > > Dividends are a decrease in equity and can't be recorded in an > > > > > > > 'Expense' > > > > > > > type account (although that's the current workaround and > > > > > > > technically > > > > > > > wrong). Therefore what I suggest is to create a dividend account > > > > > > > type under > > > > > > > equity (equity currently has only 1 type of account) which can be > > > > > > > used to > > > > > > > record dividend declarations. The value of this account can then > > > > > > > be > > > > > > > adjusted from total income. This will give us the real 'Retained > > > > > > > Earnings'. > > > > > > > Note that: The corresponding journal entry for recording in > > > > > > > dividend > > > > > > > declaration account is 'dividend payable' (which is a liability > > > > > > > account > > > > > > > created by user). To record a dividend paid, a second record is > > > > > > > created in > > > > > > > 'dividend payable' against the journal 'current account' or 'cash > > > > > > > account'. > > > > > > > > > > > > > > - > > > > > > > > > > > > > > Regards, > > > > > > > Justin Mathew > > > > > > > mjus...@protonmail.com > > > > > > > Sent with ProtonMail Secure Email. > > > > > > > ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ > > > > > > > On Tuesday, April 16, 2019 6:25 PM, Christopher Lam < > > > > > > > christopher....@gmail.com> wrote: > > > > > > > > > > > > > > > The "Retained Earnings" part of the Balance Sheet has nothing > > > > > > > > to do with > > > > > > > > dividends. > > > > > > > > IIUC on the balance sheet date X, the retained earnings simply > > > > > > > > means the > > > > > > > > total income up to date X, minus total expenses up to date X. > > > > > > > > If the books were 'closed' on date X, the income&expenses would > > > > > > > > be > > > > > > > > zeroed out to Equity:Closing Transactions. This is what > > > > > > > > Retained Earnings > > > > > > > > mean to reflect. They suit most sole traders / small businesses > > > > > > > > very well. > > > > > > > > From your description of 'owning a company with shares' / > > > > > > > > 'selling > > > > > > > > shares of company' / 'issuing dividends' I honestly have no > > > > > > > > idea how the > > > > > > > > books should look like, nor which chart of accounts should > > > > > > > > apply, nor > > > > > > > > whether the GnuCash reports are appropriate to produce useful > > > > > > > > reports. > > > > > > > > On Tue, 16 Apr 2019 at 12:39, Justin Mathew via gnucash-user < > > > > > > > > gnucash-user@gnucash.org> wrote: > > > > > > > > > > > > > > > > > Maf, > > > > > > > > > > > > > > > > > > > you should keep replies on-list, others can contribute and > > > > > > > > > > maybe in > > > > > > > > > > the future > > > > > > > > > > > > > > > > > > the thread can save a question being asked in the first > > > > > > > > > > place.... > > > > > > > > > > "reply All" > > > > > > > > > > > > > > > > > > in your email client is a good way. > > > > > > > > > > > > > > > > > > Opps, I had read about it, but missed it in the heat of > > > > > > > > > replying. > > > > > > > > > Will keep that mind henceforth. > > > > > > > > > > > > > > > > > > > Closing the books was important in paper days, not so much > > > > > > > > > > with > > > > > > > > > > digital > > > > > > > > > > > > > > > > > > accounts where the software can do everything quickly & > > > > > > > > > > repeatably., > > > > > > > > > > IMHO > > > > > > > > > > > > > > > > > > closing books isn't really needed any more, as long as you > > > > > > > > > > keep > > > > > > > > > > secure backups > > > > > > > > > > > > > > > > > > & reports etc for traceablity over the years. > > > > > > > > > > > > > > > > > > Yes, I read this suggestion in gnu tutorial and concepts > > > > > > > > > manual few > > > > > > > > > hours ago infact. I am new to accounting to be honest. Just > > > > > > > > > learning it > > > > > > > > > with a fictitious company and transactions. > > > > > > > > > > > > > > > > > > I have a part of the expenses tree that is something like > > > > > > > > > > "non-taxable". so > > > > > > > > > > > > > > > > > > expenses:non-taxable:dividends or :corporationTax etc. Easy > > > > > > > > > > to > > > > > > > > > > exclude the > > > > > > > > > > > > > > > > > > whole branch from reports rather than ad-hoc accounts. > > > > > > > > > > > > > > > > > > And I didn't know that feature existed. > > > > > > > > > > > > > > > > > > > whereas your earlier reference says that dividends are paid > > > > > > > > > > from a > > > > > > > > > > temproary > > > > > > > > > > > > > > > > > > equity account that reduces retained earnings. (sounds like > > > > > > > > > > an > > > > > > > > > > "expense" > > > > > > > > > > > > > > > > > > (english sense, not formal GAAP definition) to me, in that > > > > > > > > > > both > > > > > > > > > > sorts of > > > > > > > > > > > > > > > > > > payment reduce retained earnings - just that dividends are > > > > > > > > > > after the > > > > > > > > > > profit & > > > > > > > > > > > > > > > > > > tax calcs are done) > > > > > > > > > > > > > > > > > > That's a good way to think. And I guess, this is the only > > > > > > > > > workaround > > > > > > > > > at the moment. It does 'sounds' like expense but I am not too > > > > > > > > > sure to say > > > > > > > > > that it 'is' expense. > > > > > > > > > > > > > > > > > I don't know if I can call this a bug; but this isn't the > > > > > > > > > technically > > > > > > > > > correct behavior. GnuCash is intended to be used in > > > > > > > > > accounting spheres > > > > > > > > > regulated by different govts and laws. And because of this, > > > > > > > > > GnuCash should > > > > > > > > > treat dividend payoffs in the standardized and technically > > > > > > > > > correct way ie, > > > > > > > > > a dividend declaration account that is a part of 'equity' > > > > > > > > > which reduces the > > > > > > > > > 'retained earnings' in reports. > > > > > > > > > > > > > > > > > Anyway, let the more experienced development team make a call > > > > > > > > > on this. > > > > > > > > > I shall raise this with the dev team as well. I am alao > > > > > > > > > copying this to > > > > > > > > > gnucash-de...@gnucash.org. I am not a part of the dev mailing > > > > > > > > > lists, but > > > > > > > > > I guess this will reach them. > > > > > > > > > > > > > > > > > - > > > > > > > > > > > > > > > > > > Regards, > > > > > > > > > Justin Mathew > > > > > > > > > mjus...@protonmail.com > > > > > > > > > Sent with ProtonMail Secure Email. > > > > > > > > > ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ > > > > > > > > > On Tuesday, April 16, 2019 5:34 PM, Maf. King > > > > > > > > > m...@chilwell.net > > > > > > > > > wrote: > > > > > > > > > > > > > > > > > > Hi Justin, > > > > > > > > > > you should keep replies on-list, others can contribute and > > > > > > > > > > maybe in > > > > > > > > > > the future > > > > > > > > > > > > > > > > > > the thread can save a question being asked in the first > > > > > > > > > > place.... > > > > > > > > > > "reply All" > > > > > > > > > > > > > > > > > > in your email client is a good way. > > > > > > > > > > I think it is a bit of a technical distinction, GAAP left > > > > > > > > > > over from > > > > > > > > > > the days > > > > > > > > > > > > > > > > > > of paper books. Formally, expenses are a (set of ) > > > > > > > > > > temporary equity > > > > > > > > > > account(s) that should be closed (or zeroed) to a retained > > > > > > > > > > earnings > > > > > > > > > > equity > > > > > > > > > > > > > > > > > > account each year - to give a profit figure. > > > > > > > > > > whereas your earlier reference says that dividends are paid > > > > > > > > > > from a > > > > > > > > > > temproary > > > > > > > > > > > > > > > > > > equity account that reduces retained earnings. (sounds like > > > > > > > > > > an > > > > > > > > > > "expense" > > > > > > > > > > > > > > > > > > (english sense, not formal GAAP definition) to me, in that > > > > > > > > > > both > > > > > > > > > > sorts of > > > > > > > > > > > > > > > > > > payment reduce retained earnings - just that dividends are > > > > > > > > > > after the > > > > > > > > > > profit & > > > > > > > > > > > > > > > > > > tax calcs are done) > > > > > > > > > > Closing the books was important in paper days, not so much > > > > > > > > > > with > > > > > > > > > > digital > > > > > > > > > > > > > > > > > > accounts where the software can do everything quickly & > > > > > > > > > > repeatably., > > > > > > > > > > IMHO > > > > > > > > > > > > > > > > > > closing books isn't really needed any more, as long as you > > > > > > > > > > keep > > > > > > > > > > secure backups > > > > > > > > > > > > > > > > > > & reports etc for traceablity over the years. > > > > > > > > > > I have a part of the expenses tree that is something like > > > > > > > > > > "non-taxable". so > > > > > > > > > > > > > > > > > > expenses:non-taxable:dividends or :corporationTax etc. Easy > > > > > > > > > > to > > > > > > > > > > exclude the > > > > > > > > > > > > > > > > > > whole branch from reports rather than ad-hoc accounts. > > > > > > > > > > If you think that it is a bug / sub-optimal behaviour, by > > > > > > > > > > all means > > > > > > > > > > submit a > > > > > > > > > > > > > > > > > > bug report or RFE for the devs to comment on. They know far > > > > > > > > > > more > > > > > > > > > > than me > > > > > > > > > > > > > > > > > > about the GC architecture decisions etc. > > > > > > > > > > Maf. > > > > > > > > > > On Tuesday, 16 April 2019 12:21:52 BST Justin Mathew wrote: > > > > > > > > > > > > > > > > > > > > > Yes, that seems to be the only way now. Gnucash doesn't > > > > > > > > > > > complain > > > > > > > > > > > if we do > > > > > > > > > > > > > > > > > > > that way. And you're indeed lucky that you're accountant > > > > > > > > > > > doesn't > > > > > > > > > > > complain. > > > > > > > > > > > > > > > > > > > :) > > > > > > > > > > > To think from a larger perspective now, I think GnuCash > > > > > > > > > > > should to > > > > > > > > > > > handle > > > > > > > > > > > > > > > > > > > dividends the right way; primarily because dividend isn't > > > > > > > > > > > technically an > > > > > > > > > > > > > > > > > > > expense of the business and marking it as an expense will > > > > > > > > > > > only > > > > > > > > > > > create > > > > > > > > > > > > > > > > > > > issues later (eg, inaccurate certain expense reports, > > > > > > > > > > > wrong > > > > > > > > > > > analytics, > > > > > > > > > > > > > > > > > > > etc.). > > > > > > > > > > > If this behavior isn't because of the way we (users) are > > > > > > > > > > > doing it, > > > > > > > > > > > shall I > > > > > > > > > > > > > > > > > > > notify in the development list to consider this as an > > > > > > > > > > > error and > > > > > > > > > > > correct it? > > > > > > > > > > > > > > > > > > > - > > > > > > > > > > > > > > > > > > > > > > Regards, > > > > > > > > > > > Justin Mathew > > > > > > > > > > > mjus...@protonmail.com > > > > > > > > > > > Sent with ProtonMail Secure Email. > > > > > > > > > > > ‐‐‐‐‐‐‐ Original Message ‐‐‐‐‐‐‐ > > > > > > > > > > > On Tuesday, April 16, 2019 4:42 PM, Maf. King > > > > > > > > > > > m...@chilwell.net > > > > > > > > > > > wrote: > > > > > > > > > > > > > > > > > > > > Hi Justin, > > > > > > > > > > > > while it is contrary to the advice given in the link you > > > > > > > > > > > > supplied, I've > > > > > > > > > > > > > > > > > > > > always recorded dividend payouts as an Expense - but it > > > > > > > > > > > > is one > > > > > > > > > > > > of a > > > > > > > > > > > > > > > > > > > > handful that are excluded from the corporation tax > > > > > > > > > > > > calc, as they > > > > > > > > > > > > are > > > > > > > > > > > > > > > > > > > > declared after tax / from profits. > > > > > > > > > > > > My accountant has never complained - UK regs - YMMV, of > > > > > > > > > > > > course! > > > > > > > > > > > > Maf. > > > > > > > > > > > > > > > > > > > > -- > > > > > > > > > > Maf. King > > > > > > > > > > PGP Key fingerprint = 8D68 A91F 733B 2C1F 43B7 2B7C E591 > > > > > > > > > > E8E1 0DE7 > > > > > > > > > > C542 > > > > > > > > > > > > > > > > > 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. > > > > > > > > > > > > gnucash-devel mailing list > > > > > > gnucash-de...@gnucash.org > > > > > > https://lists.gnucash.org/mailman/listinfo/gnucash-devel _______________________________________________ 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. 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