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.