Hello folks,

I am an engineering oriented CEO of a small U.S. based tech company.  So, this questions may be just my accounting ignorance.  But perhaps one of you can enlighten me!

I understand the standard accounting formula of Assets = Liabilities + Equity, and therefore Equity = Assets - Liabilities.  That makes sense!

But Odoo seems to compute Equity = Assets - Liabilities - Prior Year Retained Earnings (PRE).   Or in other words, PRE are considered a liability even as the Odoo Balance Sheet does not include them in the Liability section of the balance sheet.

Why is that, and is that correct by U.S. Balance Sheet reporting standards?  I have Googled this and found one explanation that PRE are a liability because they belong to the shareholders rather than the company.  I understand that argument.  But then again, the shareholders own all the assets and liabilities of the company, so why subtract PRE from the assets?

Any enlightenment much appreciated!