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Accounting For Developers, Part I

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Re: Accounting For Developers, Part I

#181

Post by EvanAnderson »

2143 wrote: post #178
EvanAnderson wrote: post #25

Sometimes non-accounting people get hung-up on the words "debit" and "credit" and think they have to do with "owing" or "being owed" money. The effect of a debit or credit on the business depends on the accounts in the transaction and debit and credit don't have anything to do with the "direction" of a flow of money. My 100-level accounting instructor summarized it as: "A debit is the entry in the left column, and a…

> Sometimes non-accounting people get hung-up on the words "debit" and "credit" In took an undergrad accounting class centuries ago. I'm a CS major, but we were required to take a beginner class in accounting, which in retrospect was a good thing. In the accounting class (the double-entry bookkeeping part), for any transaction two accounts were involved: - Money was "debited" into one account. ie., money came into th…

On the bank's books your account is a liability (money the bank owes you). Simplistically, when you deposit money the bank's cash balance is debited and your account is credited.

Re: Accounting For Developers, Part I

#182

Post by barking_biscuit »

candiddevmike wrote: post #161
barking_biscuit wrote: post #160

Earlier quoted context omitted.

You can model the data in such a way that the recorded transactions can be reported on in either accrual or cash basis.

Not sure what you mean, as far as I know the government requires businesses to pick one form and stick to it. Unless you're building accounting software you'd have no need to support both ways.

I build accounting software.

Re: Accounting For Developers, Part I

#183

Post by balderdash »

vineyardmike wrote: post #92
potamic wrote: post #27

Any time the idea of double entry bookkeeping comes up there is nothing but unanimous advocacy for it. This thread echoes the same sentiment where there's several comments about the importance of double entry. And yet like all previous endorsements I've heard, I've not been able to take away why it is so important. The reasons are always around error tracking, tracing source of funds, standing the test of time etc. a…

You may not need double entry if you’re just tracking your personal checking account to see if you can pay your bill… but it still may help. You answered your own questions though. It’s useful for error tracking and consistency. As a simple example to explain how it can help from a consistency perspective - think about a tool like Mint or Personal Capital or Nerd Wallet. They let you sign into your bank account and u…

To be a little pedantic, the beauty of double entry is that you can actually see that you DON’T get richer by paying down your mortgage (or poorer - also excluding the effect of lowered future interest payments), you’re just shrinking your balance sheet (by reducing an asset (cash) and a liability (loan) by the same amount)

Re: Accounting For Developers, Part I

#184

Post by cupachabra »

wholien wrote: post #3
cupachabra wrote: post #2

Ok this is an interesting post but I as understand it, its more like "what can go wrong when developing accounting software" and not that developers need a special type of accountant?

Yes this post is about developing accounting or other kinds of software that tracks money (from the subtitle: "... we walk through basic accounting principles for anyone building products that move and track money"). One can treat it as a primer on double-entry accounting as well.

Super helpful in that case :)

Re: Accounting For Developers, Part I

#185

Post by pwpw »

As a CPA looking for an entry-level job as a software developer, it has been disheartening to see hiring managers brush aside my accounting knowledge and experience as next to worthless. I think the theory behind double-entry accounting is super interesting and a base-level knowledge would be helpful for many developers. Particularly those working at a small startup that have to wear the accounting/financial hat. The sooner you use double-entry accounting, the better your life will be in the future. Double-entry is an incredibly old system that's battle-tested, so it's remarkable to see some people still opposed to it today.

It's reassuring to see so many comments here expressing positive sentiment around the topic!

Re: Accounting For Developers, Part I

#186

Post by tunesmith »

juped wrote: post #176
tunesmith wrote: post #103

Earlier quoted context omitted.

That makes sense to me in terms of assets and liabilities, but when I read https://beancount.github.io/docs/the_double_entry_counting_m... and it described income as being negative and expense as being positive, it broke my brain a little bit.

That's because it's just wrong, like everything from the docs of ledger and its descendants (and every "accounting for developers" article, except surprisingly not TFA here!), and accountants are just correct to use unsigned numbers. A credit entry is a source, and a debit entry is a sink. When I do $4000 worth of consulting services work for Joe Bloggs, this gets entered as a $4000 credit to Income - Consulting Serv…

This makes a lot more sense to me. Source and sink. And I think illuminates why double-entry is confusing to non-business individuals, because we don't tend to think of Accounts Receivable for our persons.

Re: Accounting For Developers, Part I

#187

Post by themadturk »

When I went to school for an AAA in Computer Programming in 1989-90, a quarter of accounting was required for graduation. The instructor didn't like computers (which was the reason about half the class was there), and tried his best to convince everyone they needed to major in accounting, but he was a good teacher and I learned a lot of stuff, none of which I've needed over the last 30+ years but all of which I was glad I learned.

Re: Accounting For Developers, Part I

#188

Post by Serenityflat »

ParkGrove wrote: post #177
tunesmith wrote: post #103

Earlier quoted context omitted.

That makes sense to me in terms of assets and liabilities, but when I read https://beancount.github.io/docs/the_double_entry_counting_m... and it described income as being negative and expense as being positive, it broke my brain a little bit.

[flagged]

[flagged]

Re: Accounting For Developers, Part I

#189

Post by joshjje »

tepitoperrito wrote: post #62
rahimnathwani wrote: post #56

Earlier quoted context omitted.

> "debit" and "credit" and > think they have to do with > "owing" or "being owed" money. I think of it as 'owing' (liability) or 'owning' (asset). When you credit an account, you either increase what you 'owe' on that account OR decrease what you 'own' on that account. Examples: - bank credits a customer account => bank owes more to its customers - company credits income account => company owes more to its shareholde…

I think (would love to know if I'm wrong) of it as: debit => from, credit => to

In my thinking, as a programmer, debit = positive, and credit = negative. NOW, what type of account those are going to like others have said changes things, but fundamentally if you are adding a positive amount to an account thats a debit, and if you are adding a negative amount thats a credit.

Re: Accounting For Developers, Part I

#190

Post by jlokier »

2143 wrote: post #178
EvanAnderson wrote: post #25

Sometimes non-accounting people get hung-up on the words "debit" and "credit" and think they have to do with "owing" or "being owed" money. The effect of a debit or credit on the business depends on the accounts in the transaction and debit and credit don't have anything to do with the "direction" of a flow of money. My 100-level accounting instructor summarized it as: "A debit is the entry in the left column, and a…

> Sometimes non-accounting people get hung-up on the words "debit" and "credit" In took an undergrad accounting class centuries ago. I'm a CS major, but we were required to take a beginner class in accounting, which in retrospect was a good thing. In the accounting class (the double-entry bookkeeping part), for any transaction two accounts were involved: - Money was "debited" into one account. ie., money came into th…

> If $10 comes into my bank account, I get a message saying "$10 was credited into your account".

That's because you are a creditor to the bank. After you put cash into your bank account, the bank owes you cash. You are lending them your cash, and the more you lend them, the more of a creditor you are. That's why they say your account is in credit.

When you take too much cash out of the bank, it's obvious you are a debtor to the bank. You owe them. You're in debt to them. That's why taking cash out is called debiting. The more you take out, the closer to a debtor you become, though hopefully on balance you've been more of a creditor than a debtor.

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