Mark,
Hi.
I'm trying (& failing) to understand opening creditors.
I've created a dummy business - I entered an invoice with the previous years date on it. When I look in the various accounts I can clearly see that the money has been debited out of the electricity account and credited in the accounts payable. The P&L correctly shows no profit but the balance sheet has 'current earnings' under the equity heading equal to the opening creditor. I realise that the balance sheet must balance but why doesn't it just show negative owners capital? What is 'current earnings'? It obviously isn't profit/loss because it doesn't agree with the P&L.
Thanks in advance for any help.
Wyn Morgan
Hi Wyn,
The 'Current Earnings' account balance is simply net balance of all the income and expense accounts. The Profit and Loss report looks at the change in this balance over time. In your case the opening balance of the Electricity account is not zero. To fix this, edit the purchase invoices from last year and set the account to 'Owners Capital'.
Regards
