Accounting for computer scientists (2011)
martin.kleppmann.com
Accounting for computer scientists (2011)
1–10 of 51 posts
Re: Accounting for computer scientists (2011)
#2I've always thought that accounting is arithmetic made difficult, but this helps a lot.
Re: Accounting for computer scientists (2011)
#3I've always thought that accounting is arithmetic made difficult, but this helps a lot.
It's worth remembering that accounting was developed before negative numbers.
Re: Accounting for computer scientists (2011)
#4> Even “Bookkeeping for Dummies” makes my head spin. Surely this stuff can’t be that difficult?
Is this an artifact of accounting itself? Or of the country in which you live?
In my country, accounting is… well still not easy but at least I would say it is accessible to most.
Meanwhile my impression of the US tax system for example (not my country!), is that it is a very complicated system with grave consequences for making any sort of mistake. All thanks to the efforts of US companies hiring lobbyists to work against general public interest.
Re: Accounting for computer scientists (2011)
#5> Even “Bookkeeping for Dummies” makes my head spin. Surely this stuff can’t be that difficult? Is this an artifact of accounting itself? Or of the country in which you live? In my country, accounting is… well still not easy but at least I would say it is accessible to most. Meanwhile my impression of the US tax system for example (not my country!), is that it is a very complicated system with grave consequences for…
I find pure accounting confusing in its principles, regardless of country and details. The doubling of transactions and balances, and the non intuitive signs, mess me up every time. This article goes some small way for me to not be completely angry every time I try to learn accounting (next step:French language :).
Re: Accounting for computer scientists (2011)
#6Not accounting related, but this guy's book "Designing Data-Intensive Applications" is a very, very well written book for people interested in that sort of thing!
Re: Accounting for computer scientists (2011)
#7The fundamentals of accounting (in particular double-entry bookkeeping) are simple, but they're often presented or understood as a series of unconnected facts that must be memorized.
It doesn't have to be this way!
Start with this identity:
Equity = Assets - Liabilities
That identity can be rearranged:
Assets = Equity + Liabilities
Accounting transactions are made when something happens in the business. Each transaction changes the balance sheet. The balance sheet is made up of the three items in the identity, but there's more granularity. For example Assets might have a 'cash/bank' account and also an 'inventory' account
Any accounting transaction touches one or more than one of these three accounts.
Got some new equity funding? It increases Assets (cash in the bank) but also increases Equity (paid up share capital) by the same amount. So the identity is preserved.
Sold a product and collected some cash? Assets go up: yes, inventory decreased $10, but cash went up $15. So now Equity (retained earnings) goes up by $5 and the identity still holds.
The P&L (aka Income Statement) shows how the balance sheet changed between two points in time. Profit is the change in Equity between those two points (after removing any increase decreased from share issuance or buybacks).
If you've read this far and want some intuition about debits and credits, I wrote a brief post here: https://www.encona.com/posts/debits-and-credits
Re: Accounting for computer scientists (2011)
#8Kleppmann knocks it out of the park here.
Most accounting is actually insane. What should be an immutable ledger is actually the farthest thing from.
A few years ago I had a gig writing some custom reporting for a business that was struggling to get reproducible reports (i.e. I ran this report yesterday and now I can never produce the same report again) and it turned out their accounting practices were the root of the problem.
Closing books and reconciliation have to be the two practices which are most commonly done in the absolute dumbest way possible in electronic bookkeeping. Don't mutate your historical records!
Re: Accounting for computer scientists (2011)
#9> Even “Bookkeeping for Dummies” makes my head spin. Surely this stuff can’t be that difficult? Is this an artifact of accounting itself? Or of the country in which you live? In my country, accounting is… well still not easy but at least I would say it is accessible to most. Meanwhile my impression of the US tax system for example (not my country!), is that it is a very complicated system with grave consequences for…
I find pure accounting confusing in its principles, regardless of country and details. The doubling of transactions and balances, and the non intuitive signs, mess me up every time. This article goes some small way for me to not be completely angry every time I try to learn accounting (next step:French language :).
Start with the accounting equation. That's critical foundation.
Re: Accounting for computer scientists (2011)
#10Discussed at the time:
Accounting for Computer Scientists - https://news.ycombinator.com/item?id=2298471 - March 2011 (75 comments)