Double-entry bookkeeping as a directed graph
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Double-entry bookkeeping as a directed graph
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Re: Double-entry bookkeeping as a directed graph
#2Hi, all!
I'm not an accountant but decided to study double-entry bookkeeping and basic accounting a while ago. I learned a lot from many places, including great threads here on HN, and wanted to give back to the community. In this article, I explain the mechanics of double-entry bookkeeping and how I came to realize it's a directed graph.
I know there are many accounting nerds on HN so please feel free to criticize or suggest changes where I got things wrong!
Re: Double-entry bookkeeping as a directed graph
#3Hi, all! I'm not an accountant but decided to study double-entry bookkeeping and basic accounting a while ago. I learned a lot from many places, including great threads here on HN, and wanted to give back to the community. In this article, I explain the mechanics of double-entry bookkeeping and how I came to realize it's a directed graph. I know there are many accounting nerds on HN so please feel free to criticize o…
> and how I came to realize it's a directed graph.
One of the funnest things in computer science is realizing how some problem that you may not suspect initially turns out to be some type of graph.
Re: Double-entry bookkeeping as a directed graph
#4Nothing of substance to add, I just wanted to say that I thoroughly enjoyed this post.
Re: Double-entry bookkeeping as a directed graph
#5Hi, all! I'm not an accountant but decided to study double-entry bookkeeping and basic accounting a while ago. I learned a lot from many places, including great threads here on HN, and wanted to give back to the community. In this article, I explain the mechanics of double-entry bookkeeping and how I came to realize it's a directed graph. I know there are many accounting nerds on HN so please feel free to criticize o…
Nice article, congratulations. I have worked with information systems all my life and one of the biggest insights I had was that the transaction, a purchase or a sale, which is the basis of the ERP system, is converted into 2 flows, the money that enters or leaves on one side and the product or service in another, this is accounting double entry. It may be obvious and simple, but I see that few people in my area have this understanding.
Re: Double-entry bookkeeping as a directed graph
#6Hi, all! I'm not an accountant but decided to study double-entry bookkeeping and basic accounting a while ago. I learned a lot from many places, including great threads here on HN, and wanted to give back to the community. In this article, I explain the mechanics of double-entry bookkeeping and how I came to realize it's a directed graph. I know there are many accounting nerds on HN so please feel free to criticize o…
One of those threads may have been a blog post by Martin Kleppmann [1], who also describes double-entry bookkeeping as a directed graph.
[1] https://martin.kleppmann.com/2011/03/07/accounting-for-compu...
Re: Double-entry bookkeeping as a directed graph
#7I think people underestimate the beauty and impact of accounting.
Just a tiny number of formulas (accounting identities [1]) and statements (P&L, balance sheet, etc.) can represent what's going on in any org in ways that can be roughly comparable. Reminds me of the "fundamental theorem of calculus" or "central dogma of biology".
Accounting is also where we get math and written language [2] as ancient Mesopotamian civilizations initially kept track of commodities using specific "accounting tokens" [3] shaped like the thing represented, and that evolved into written language, imagine: hieroglyphics.
Later, Al-Jajr [4] (aka algebra, literally "balancing") was invented by Al-Khwarizmi (origin of "algorithm") to solve Islamic inheritance law, whose rules of splitting up became a series of equations that led to the need to solve them quickly and correctly. Al-Khwarizmi's quadratic formula was the origin of why "algorithm" gets its name from him.
[1] https://en.wikipedia.org/wiki/Accounting_identity
[2] https://en.wikipedia.org/wiki/History_of_accounting
[3] https://en.wikipedia.org/wiki/History_of_ancient_numeral_sys...
Re: Double-entry bookkeeping as a directed graph
#8Hi, all! I'm not an accountant but decided to study double-entry bookkeeping and basic accounting a while ago. I learned a lot from many places, including great threads here on HN, and wanted to give back to the community. In this article, I explain the mechanics of double-entry bookkeeping and how I came to realize it's a directed graph. I know there are many accounting nerds on HN so please feel free to criticize o…
I’ve been in finance for nearly 20 years and okay, so, I’m kind of hesitant to admit… this is so great. Would love for my controllers to create such graphical flows of operating results. At some scale accounting gets pretty hard (hard as in at least one professor on the accounting policies team) and what I’ve learned from statistics is that graphics matter (Ross Ihaka, Andrew Gelman). With the appropriate abstraction any figure can get a graph of the constituting components. Moment of clarity here, thank you.
Re: Double-entry bookkeeping as a directed graph
#9My understanding of double-entry bookkeeping is that it does not care who Alice bought the book from, nor what their accounts look like.
Instead, the "double entry" that complements the money leaving Alice's cash ledger is the entry of the value of the book into Alice's "book ledger", one decreases by $20, and the other increases by the same amount.
Re: Double-entry bookkeeping as a directed graph
#10My understanding of double-entry bookkeeping is that it does not care who Alice bought the book from, nor what their accounts look like. Instead, the "double entry" that complements the money leaving Alice's cash ledger is the entry of the value of the book into Alice's "book ledger", one decreases by $20, and the other increases by the same amount.
You're right about the double-entry part, but bookkeeping more generally definitely cares about who Alice bought the book from.