Types of Equity
In Sage 50, there are three types of equity:
- Equity - Retained Earnings
- Equity - doesn't close
- Equity - closes
Some equity accounts, like Common Stock, are carried forward from year to year. Thus, they are designated Equity/doesn't close. Other equity accounts, like Dividends Paid, are zeroed at year-end, with their amounts moved to the Retained Earnings account. These accounts are designated Equity/closes.
Retained Earnings is the key account. There can be only one Retained Earnings account, but you must have one to roll each year's profit or loss into. Thus, Retained Earnings, together with any Equity/doesn't close accounts, always shows the net worth of the company prior to the current year. All of the Equity/closes accounts track the change to net worth for the current year.