Double-entry bookkeeping as a directed graph

Post by someguydave » Thu, Apr 11, 2024, 1:38 PM UTC

bregma wrote: post #348

zie wrote: post #317

Earlier quoted context omitted.

I agree generally speaking, but what does that have to do with your local books? Nothing. You almost certainly don't have access to your employer's books. Also, the ledger entries for "bregma, services rendered" i.e. payroll will be much more complicated than that, there will be taxes, deductions, etc they have to account for as well.

> what does that have to do with your local books? It's how double-entry bookkeeping works. Money can neither be created nor destroyed. On your local books you have an account where money goes and appears to be destroyed, but in reality there is a doubled entry in someone else's books. Just because you're unaware of it does not mean it does not exist. And it's true that bookkeepers will have splits in their ledger in…

Post by randomdata » Thu, Apr 11, 2024, 1:46 PM UTC

omichowdhury wrote: post #326

randomdata wrote: post #234

Earlier quoted context omitted.

That method only works if money can be created out of thin air, and also destroyed. The grandparent comment was pretty clear that money cannot be created out of thin air, nor can it be destroyed. A curious contradiction. How do we resolve it?

While money can’t be created or destroyed (unless you run a central bank…), value can be. Ledgers always have a specific perspective, and that perspective can assign a different value to something than someone else. In the case of gifting something, from the perspective of the gifter, they destroyed some value they had on their books and got nothing of value in return. There’s an account type for tracking why your ne…

Post by btbuildem » Thu, Apr 11, 2024, 1:49 PM UTC

zamubafoo wrote: post #173

btbuildem wrote: post #34

I think I'm missing something here. How does looking at transaction history as a directed graph help anything? Is it an improvement on the centuries-old "double-entry" practice? It seems to barely work with the toy example of couple transactions - imagine what the graph would look like with dozens or hundreds of edges between pairs of nodes. What use would there be for the typical algorithms that work with graphs? Th…

I can see what you are saying, but I think it helps in two ways: 1. it is another way to conceptualize an idea. For most purposes this might not be relevant, but who knows where a hard accounting problem might be resolved through the application of graph theory (or the inverse!). 2. it is another way to visualize flows. Not everyone is financially literate or numerically inclined, so instead of handing them a table o…

Post by thomastjeffery » Thu, Apr 11, 2024, 2:35 PM UTC

mrkeen wrote: post #346

thomastjeffery wrote: post #281

Earlier quoted context omitted.

You read it correctly. The account's "balance" would be a "credit of $5". A transaction involves multiple accounts, so it would be written as multiple sentences: "Alice's account has a credit of $7. Bob's account has a debit of $7." If you want to write about the transaction itself, you could do that with a verb: "Transaction #23254 applies a debit of $7 to Bob's account, and a credit of $7 to Alice's account." A dou…

And here is a comment of mine where the reply states the opposite (I believe): https://news.ycombinator.com/item?id=39993175

Post by tantalor » Thu, Apr 11, 2024, 3:29 PM UTC

ChirronT447 wrote: post #304

tantalor wrote: post #231

Earlier quoted context omitted.

> If you withdraw money from the ATM, you debit your bank account and credit your cash account You have that exactly backwards! Assets (like bank accounts and cash) are "debit accounts" meaning they increase with debits and decrease with credits. When you withdraw money from your bank account, the bank account goes down, so we know that must be a credit to the bank account, while the cash goes up, that is a debit to…

Do they have it backwards? It sounds like a valid perspective to me. I take money from an ATM: the number in my current account decreases, the cash I have on hand increases. Nothing wrong there. Sure the banks perspective is different but maybe I'm not interested in that. I love that this thread is full of people confidentally saying something that sounds correct or at least reasonable and the first reply that comes…