Equity to be "Net Worth", as calculated by
Assets - Liabilities. I also understand the "Expanded Fundamental Accounting Equation" to be
Assets + Expenses = Liabilities + Equity + Income
Equity interpreted in the Expanded Equation? It seems like it can no longer be considered Net Worth.
Let me explain.
Say I have two checking accounts and two purchases:
2016/10/26 Opening Balance Assets:Checking:Chase $2000.00 Assets:Checking:Wells Fargo $500.00 Equity:Opening $-2500.00 2016/11/04 Gas station Expenses:Auto:Fuel $20.00 Assets:Checking:Chase $-20.00 2016/11/05 Dinky Donuts Expenses:Recreation:Dining $5.00 Assets:Checking:Wells Fargo $-5.00
This yields the following balance report:
$2475.00 Assets:Checking $1980.00 Chase $495.00 Wells Fargo $-2500.00 Equity:Opening $25.00 Expenses $20.00 Auto:Fuel $5.00 Recreation:Dining -------------------- 0
Everything within me screams that, because I have no
Liabilities, my Net Worth must be
$2475. However, my
Equity is this plus my
Expenses. My Net Worth is no longer simply
Assets - Liabilities. Sure, the
Equity balances the equation
Equity = (Assets + Expenses) - Liabilities
But how can I interpret
Equity in a more meaningful way than "It balances the equation"?