id = "statement-the-books-balance-and-the-equation-holds"
title = "Normal balances, the trial balance and the accounting equation on one small book"
rule = "An account MUST show its balance on its normal side (assets and expenses debit, liabilities, equity and revenue credit); the trial balance's debits MUST equal its credits; and assets MUST equal liabilities plus equity plus revenue less expenses."
status = "AUTHORITY"
sources = [
  "Pacioli, Summa (1494), ch. 36: the total of the credits equals the total of the debits (docs/spec/sources/pacioli-1494.md)",
  "FASB Concepts Statement 8, Ch. 4, E62: equity \"is the difference between the entity's assets and its liabilities\" (docs/spec/sources/fasb-asc.md)",
  "OpenStax, Principles of Accounting, Vol. 1, 3.1: normal balances (CONVENTION; docs/spec/rules.md B-5)",
]
tags = ["accrual", "book", "us", "statement", "equation"]

[setup]
currency = "USD"
fiscal_year_start = "01-01"
basis = "accrual"
rounding = "half-even"

[[setup.accounts]]
code = "1000"
name = "Cash"
type = "asset"

[[setup.accounts]]
code = "2000"
name = "Loan"
type = "liability"

[[setup.accounts]]
code = "3000"
name = "Capital"
type = "equity"

[[setup.accounts]]
code = "4000"
name = "Sales"
type = "revenue"
tax_category = "gross_receipts"

[[setup.accounts]]
code = "6000"
name = "Rent"
type = "expense"
tax_category = "rent_property"

[[events]]
date = "2026-01-02"
description = "Members put in cash"
lines = [
  { account = "1000", side = "debit", amount = "5000.00" },
  { account = "3000", side = "credit", amount = "5000.00" },
]

[[events]]
date = "2026-01-03"
description = "A loan"
lines = [
  { account = "1000", side = "debit", amount = "2000.00" },
  { account = "2000", side = "credit", amount = "2000.00" },
]

[[events]]
date = "2026-01-10"
description = "A sale"
lines = [
  { account = "1000", side = "debit", amount = "750.50" },
  { account = "4000", side = "credit", amount = "750.50" },
]

[[events]]
date = "2026-01-15"
description = "Rent"
lines = [
  { account = "6000", side = "debit", amount = "1200.25" },
  { account = "1000", side = "credit", amount = "1200.25" },
]

# By hand. Cash: 5000.00 + 2000.00 + 750.50 - 1200.25 = 6550.25.
# Debit side: cash 6550.25 + rent 1200.25 = 7750.50.
# Credit side: loan 2000.00 + capital 5000.00 + sales 750.50 = 7750.50.
[[expect]]
query = "trial_balance"
as_of = "2026-12-31"
[expect.values]
"1000" = "6550.25"
"2000" = "-2000.00"
"3000" = "-5000.00"
"4000" = "-750.50"
"6000" = "1200.25"

# Each on its normal side, all positive here; the equation:
# assets 6550.25 = liabilities 2000.00 + equity 5000.00
#                  + (revenue 750.50 - expenses 1200.25) = 6550.25.
[[expect]]
query = "balances"
as_of = "2026-12-31"
[expect.values]
"1000" = "6550.25"
"2000" = "2000.00"
"3000" = "5000.00"
"4000" = "750.50"
"6000" = "1200.25"

# The trial balance as of an earlier day balances too: on January 9 there
# is no sale and no rent.
[[expect]]
query = "trial_balance"
as_of = "2026-01-09"
[expect.values]
"1000" = "7000.00"
"2000" = "-2000.00"
"3000" = "-5000.00"
"4000" = "0.00"
"6000" = "0.00"