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Double-entry bookkeeping as a directed graph

matheusportela.com

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Re: Double-entry bookkeeping as a directed graph

#41

Post by EvanAnderson »

qznc wrote: post #15

Still too complicated. It goes wrong with "Let’s add the Transaction column to our table." Don't store the account data. Instead store the transactions. Compute the accounts from that. The table "Transactions" should have the fields: Date, Amount, SourceAccount, TargetAccount, Description. That is how it becomes beautiful in my opinion. Unlearn this habit of thinking in accounts just because that is what you know fro…

Any time I've dealt with bookkeeping or accounting software where I find functionality like "Rebalance accounts" I become suspicious and wary. I know that the programmer has tried to be clever and keep running totals, versus calculating them the source transactions. There be dragons there.

Re: Double-entry bookkeeping as a directed graph

#42

Post by rahimnathwani »

t_mann wrote: post #32

> Definition 6: Credit An entry that represents money leaving an account. > Definition 7: Debit An entry that represents money entering an account. Not really, the meaning of debit and credit depends on the type of account: https://en.wikipedia.org/wiki/Debits_and_credits Maybe there's a reason why it takes more than one course to become a CPA ( https://www.accounting.com/careers/cpa/how-to-become/ ).

  Not really, the meaning of debit and credit depends on the type of account
That's how most accountants think about it. But I think there's something more fundamental: a CR entry is an increase is what the company owes (to creditors or shareholders), and a DR is an increase in what the company owns.

EDIT: see this link for how this relates to the accounting equation https://news.ycombinator.com/item?id=32501707

Re: Double-entry bookkeeping as a directed graph

#43

Post by Solvency »

qznc wrote: post #28
thfuran wrote: post #20

Earlier quoted context omitted.

Isn't having to replay every transaction in history to query current balance rather inefficient?

You can cache it. ;)

technical speaking what does 10 years of transactions look like when it's "cached" with one current year still being raw text lines? how are the two reconciled?

Re: Double-entry bookkeeping as a directed graph

#44

Post by EvanAnderson »

kayo_20211030 wrote: post #14

Nice job on this. But, one has to be careful with redefining terms that have a generally accepted meaning. Changing Debit/Credit to Incoming/Outgoing smacks of jargon and will cause confusion. Any bookkeeper will understand what credit cash and debit expense means. Putting that in incoming and outgoing terms will not help the people who do the work, or have to explain the work. It's probably worth the effort of learn…

I'll go further: Knowing basic accounting and bookkeeping jargon is a super power when it comes to dealing with finance people. Your credibility builds tremendously when you can engage with them using the proper jargon correctly.

Re: Double-entry bookkeeping as a directed graph

#45

Post by emptyfile »

rahimnathwani wrote: post #42
t_mann wrote: post #32

> Definition 6: Credit An entry that represents money leaving an account. > Definition 7: Debit An entry that represents money entering an account. Not really, the meaning of debit and credit depends on the type of account: https://en.wikipedia.org/wiki/Debits_and_credits Maybe there's a reason why it takes more than one course to become a CPA ( https://www.accounting.com/careers/cpa/how-to-become/ ).

Not really, the meaning of debit and credit depends on the type of account That's how most accountants think about it. But I think there's something more fundamental: a CR entry is an increase is what the company owes (to creditors or shareholders), and a DR is an increase in what the company owns. EDIT: see this link for how this relates to the accounting equation https://news.ycombinator.com/item?id=32501707

[dead]

Re: Double-entry bookkeeping as a directed graph

#46

Post by toong »

em-bee wrote: post #18
dkyc wrote: post #16

I find it a strange choice to explain double-entry bookkeeping with the example of "one entry for Alice, one entry for Bob". That's really not what it's about. It's obvious that a transaction with two parties could be recorded in two places, but to me the crucial point of double-entry bookkeeping is that it requires two entries for each party of the transaction . So if Alice buys book from Bob, four entries are made.…

i was about to write the same thing. knowing that double-entry is meant to apply to myself only, i actually found the example confusing, because well, of course bob is going to have an entry in his accounting book, but i don't care about bobs accounts, i don't want to track that. i only care about mine. i buy a book. how do i record this transaction using double entry bookkeeping in my accounting book? and bob is not…

You gained $20 worth of assets, so the counterpart of the $20 leaving your bank account is countered by your assets-account gaining $20

Now each year your book loses 1/5th of its value, due to wear and tear (4$ disappearing from your assets-account), this is countered by your depreciation-account (4$ tax write off, every year!)

After 5 years, it is worth $0 according to your books, but you manage to sell it again for $10: your bank account gets debited for $10, while your capital-gains-account gets credited for $10

Re: Double-entry bookkeeping as a directed graph

#47

Post by Octokiddie »

dkyc wrote: post #16

I find it a strange choice to explain double-entry bookkeeping with the example of "one entry for Alice, one entry for Bob". That's really not what it's about. It's obvious that a transaction with two parties could be recorded in two places, but to me the crucial point of double-entry bookkeeping is that it requires two entries for each party of the transaction . So if Alice buys book from Bob, four entries are made.…

Every explanation of double entry accounting seems to do the same thing. If I'm trying to understand the double part of double-entry bookkeeping, what exactly does the "double" refer to? What's being "doubled"?

How would you salvage the article to actually explain the "double" part in detail? Could you do it purely from Bob's (or Alice's) perspective?

Re: Double-entry bookkeeping as a directed graph

#48

Post by jfengel »

t_mann wrote: post #32

> Definition 6: Credit An entry that represents money leaving an account. > Definition 7: Debit An entry that represents money entering an account. Not really, the meaning of debit and credit depends on the type of account: https://en.wikipedia.org/wiki/Debits_and_credits Maybe there's a reason why it takes more than one course to become a CPA ( https://www.accounting.com/careers/cpa/how-to-become/ ).

Every time I look at accounting, the different kinds of accounts baffle me. I can never keep straight what each kind of account is used for, or which ones have positive credits and which ones have negative credits.

As far as I can tell, the point is to double the amount of work in the hopes of catching certain kinds of errors. Which makes sense when you have humans making the entries and humans doing the arithmetic.

But I grew up in a world where computers do all of the math, and it always looks to me like it's violating the Don't Repeat Yourself principle. If you say the same thing in two different places, one of them is always going to be wrong.

I feel as if, had accounting been designed in the modern era, we wouldn't have done it that way.

I'm not an accountant and my failure to understand does not make the thing wrong. But my bafflement at "credits decrease an asset account" feels emblematic of something being genuinely off base.

Re: Double-entry bookkeeping as a directed graph

#49

Post by jfengel »

rahimnathwani wrote: post #42
t_mann wrote: post #32

> Definition 6: Credit An entry that represents money leaving an account. > Definition 7: Debit An entry that represents money entering an account. Not really, the meaning of debit and credit depends on the type of account: https://en.wikipedia.org/wiki/Debits_and_credits Maybe there's a reason why it takes more than one course to become a CPA ( https://www.accounting.com/careers/cpa/how-to-become/ ).

Not really, the meaning of debit and credit depends on the type of account That's how most accountants think about it. But I think there's something more fundamental: a CR entry is an increase is what the company owes (to creditors or shareholders), and a DR is an increase in what the company owns. EDIT: see this link for how this relates to the accounting equation https://news.ycombinator.com/item?id=32501707

Isn't that exactly backwards to what most people think of credits and debits? If you credit me something, I now have something. I don't owe anything.

I can kinda squint and see "Oh, you want the universe to balance, so if I have something it is some kind of karmic debt". But it still feels like exactly the opposite of what I grew up thinking of these terms to mean.

Re: Double-entry bookkeeping as a directed graph

#50

Post by [deleted] »

Octokiddie wrote: post #47
dkyc wrote: post #16

I find it a strange choice to explain double-entry bookkeeping with the example of "one entry for Alice, one entry for Bob". That's really not what it's about. It's obvious that a transaction with two parties could be recorded in two places, but to me the crucial point of double-entry bookkeeping is that it requires two entries for each party of the transaction . So if Alice buys book from Bob, four entries are made.…

Every explanation of double entry accounting seems to do the same thing. If I'm trying to understand the double part of double-entry bookkeeping, what exactly does the "double" refer to? What's being "doubled"? How would you salvage the article to actually explain the "double" part in detail? Could you do it purely from Bob's (or Alice's) perspective?

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