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Why do Income accounts have negative sign?

By
Dave Burkholder
on 11/9/13, 2:54 PM 9,734 views

Hello everyone,

I'm using OpenERP 7 and my reports are wrong. Income Accounts show a negative balance and Expense accounts show a standard balance.

For example, on a Profit and Loss report,

Income ............................................. $ -100,000

Expense............................................$ 33,333

This is exactly backwards. I did some googling and discovered this http://forum.openerp.com/forum/topic30728.html (old thread) but it's not exactly my problem, because in that example the Expense balance is negative.

Has anyone else encountered this problem or know how I can get this corrected?

Thanks!

Assets, which include stock, investments, plant, buildings and amounts owed to the entity the accounts relate to are all recorded as DEBIT (Dr) amounts (think Debtors, the people who owe you money - they are an asset). In double entry accounting, debit amounts are treated as positive values.

Robin St.Clair
on 11/13/13, 5:59 PM
0
Robin St.Clair
On 11/13/13, 6:12 PM

Assets, which include stock, investments, plant, buildings and amounts owed to the entity the accounts relate to are all recorded as DEBIT (Dr) amounts (think Debtors, the people who owe you money - they are an asset). In double entry accounting, debit amounts are treated as positive values.

Liabilities, which include amounts of money borrowed from others, bank overdrafts, amounts we owe to suppliers (creditors), are treated as negative values.

When we sell something to a customer, the amount we receive is posted as a debit(positive amount) to the Bank Account and the other side of the double entry is posted as a credit (negative amount) to the Sales Account..

So the way your account balances are showing is quite correct.

To quote -

It was first codified in the 15th century by the Franciscan friar Luca Pacioli. In deciding which account has to be debited and which account has to be credited, the golden rules of accounting are used. This is also accomplished using the accounting equation: Equity = Assets − Liabilities. The accounting equation serves as an error detection tool. If at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. It follows that the sum of debits and the sum of the credits must be equal in value.

I trust you are now better informed

R+C

I've known since high school that debits must equal credits. I've known since then that Income is Positive and Expenses are negative. What I don't comprehend is why OpenERP decides to reverse this and show income with a NEGATIVE sign. I can't see anything in your answer that deals with this, other than an assurance that "So the way your account balances are showing is quite correct." Exactly why is it correct? And why is OpenERP the only accounting software I've ever encountered in my 34 years to display balances this way?

Thinkwell Designs, Dave Burkholder
on 11/20/13, 5:20 PM

If you have believed since High School that Income is Positive and Expenses are negative, then you have been mistaught. Go look at some 19th Century accounting ledgers. You will see that expenses are written in black ink, as debits ( and positive), whilst income is written in red as credits ( and negative). Its just the way it is.

Robin St.Clair
on 11/20/13, 6:25 PM
0
Dave Burkholder
On 11/20/13, 6:14 PM

Ok, found the solution here. Go to Accounting / Configuration / Financial Reports/Account Reports.

For each report, open it and change "Sign on Reports" to "Reverse balance sign" and then the reports will display intuitively.

Hope this helps someone.

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Asked: 11/9/13, 2:54 PM
Seen: 9734 times
Last updated: 3/16/15, 8:10 AM