4 ms·

MoneyDance doesn't appear to be a double entry system. The nice thing about double entry bookkeeping, is it allows some pretty complicated cash-flow tracking -

MoneyDance doesn't appear to be a double entry system. The nice thing about double entry bookkeeping, is it allows some pretty complicated cash-flow tracking - so setting up your accounts for a small business or consultancy is a bit easier.

peteretep 11y ago
> MoneyDance doesn't appear to be a double entry system You didn't look very carefully then
- sophacles 11y ago
  All I found was an FAQ entry from MoneyDance talking about how underneath it's double entry, but they try their hardest to hide that fact from the users. So, yeah, I guess technically it's double entry, but not in a way that is immediately obvious for a lot of use cases.
  - peteretep 11y ago
    If you can explain to me which use cases it doesn't support, I'd be interested...?
e12e 11y ago
I'm curious about this. I thought double entry book-keeping was mostly an artefact of manual/analog book-keeping. Humans are notoriously error-prone, and it's easier to avoid errors when two sets of numbers are supposed to balance out (ideally, exactly). How is double entry beneficial once all transactions are documented digitally? Could you give a somewhat concrete example? (Contrived or otherwise)?
- peteretep 11y ago
  Double-entry refers to the number of accounts related to a transaction, rather than the process of entering it twice. When you think about it, all transactions have naturally (at least) a from and a to account. In the simplest example, I move $100 from one checking account to another. This is a pain to model in a spreadsheet, where I literally create two entries, but very easy to model in an electronic dual-entry system where I create a single transaction with a from and a to end point, and an amount. Consider if I decide to buy a stock from my checking account. The from is my checking account, and then there are two "to" accounts - an account which models the value of the stock, and an account for the vendor's charges for the purchase. I might decide to aggregate all such bank charges to a single virtual account for this purpose. In this case, that virtual account would be the same as a "category" in a spreadsheet based model. It can also make budgeting and cash-flow visualization easier. I have a virtual account called "Holiday Budget", which makes a transaction to another virtual account called "Spent on Holidays" of $x every month. Whenever I spend money on a holiday item from my checking account, the "from" is my checking account, and the "to" is my "Holiday Budget". This keeps my net-worth and budgeting reports very simple - they say I spend the same $x on holidays every month - while accounting for some very lumpy spending. I can easily see if I'm over or under budget by looking at the value of the virtual account "Holiday Budget" at any point. It makes recording the value of unconventional assets easier. When I buy a laptop, I create a new account for the laptop, and transfer the money from my checking account to the virtual account that represents the value of the laptop. Every month, I draw down money from the laptop account in to an account called "depreciation". This helps me keep my budget reports insulated from lumpy spending too. A big use-case as well for me is the purchase of expensive refundable plane tickets - essentially, I buy personal futures in plane tickets when I see a good price. The virtual accounts that dual-entry allows means that when I buy a refundable ticket, I treat it as an asset in a virtual account until it's used. Again, this helps me track my spending and budgetting more effectively.
  - zrail 11y ago
    > A big use-case as well for me is the purchase of expensive refundable plane tickets - essentially, I buy personal futures in plane tickets when I see a good price. The virtual accounts that dual-entry allows means that when I buy a refundable ticket, I treat it as an asset in a virtual account until it's used. Again, this helps me track my spending and budgetting more effectively. I would like to hear more about this. Do you have alerts set up? Does this end up saving you money? Do you get to re-schedule the flight an unlimited number of times (pushing the future out) or do you have to cancel and rebuy periodically? Can you use exercise the option early?
    - peteretep 11y ago
      It's far less sophisticated than this. A route I take regularly costs ~$2700-$5000. I refuse to pay more than $3000 so I tend to book all the dates I might travel ~6 months in advance, and cancel them if I don't need them, which costs about $50.
  - saaadhu 11y ago
    Newbie to ledger here. Why not move $x from checking to Holiday Budget every month, and then track holiday spending by moving money from Holiday Budget to Spent on Holidays? Guess it throws off net worth calculations a bit, as you'd have to include the Holiday Budget as well in there. Are there other reasons?
    - sophacles 11y ago
      Check out this section and the following section of the ledger docs: http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Petty-Cash http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Pett...
    - peteretep 11y ago
      Because Holiday Budget isn't a real account, and my checking one is. If money didn't leave the checking account, it would show an incorrect budget if I marked that it had.
- sophacles 11y ago
  @peteretep gave a great reply - maybe better than this one, but here's my view on it: Stuff like this (and the next section) is easily doable: http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Petty-Cash http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Pett... A lot of the things you'll think to do in an electronic system, with tags and tables and so on, can ultimately be modeled by accounts in a double entry system, and probably just as powerfully once you add things like "virtual accounts" and the like. At some point, it's sort of like greenspun's 10th rule - any sufficiently advanced money tracking system will implement a version of double entry accounting in it.
- mikekchar 11y ago
  You can think of double entry accounting as unit tests for your financial books. It definitely does help in making sure that you don't make mistakes when you enter the data, but where it really shines is analysis after the fact. In Japan, the government actually gives me concessions for submitting my documents for income tax as double entry accounting. This is because it saves them huge amounts of money. So, if I document an expense that I want to get a deduction for, they can easily check that there is a corresponding withdrawal from the bank account to pay that expense. Especially for complicated areas, like my payroll, where I have up to 5 bank accounts in play (some of them off shore), it's absolutely the only way they can go back and understand what the heck is going on. Similarly, for me, I have sometimes gone back and discovered that I got an exchange rate wrong. Fixing that mistake is a nightmare (especially if you have to pay capital gains tax in a LIFO or FIFO manner -- you have to record the capital gains or losses for each "lot" of currency that you purchased). Double entry accounting will totally save your butt as you ripple through all your transactions changing the exchange rate for the foreign currency. If you get it wrong (i.e. over or underspend a particular "lot"), the numbers won't balance at the end. Is it necessary for your average person? Obviously not. As your finances become more complicated it kind of goes like this: intellectually interesting -> super cool -> crap, how did I get by without this? -> there is absolutely no other way to do it and not get arrested for tax evasion.

peteretep 11y ago

> MoneyDance doesn't appear to be a double entry system You didn't look very carefully then

sophacles 11y ago
All I found was an FAQ entry from MoneyDance talking about how underneath it's double entry, but they try their hardest to hide that fact from the users. So, yeah, I guess technically it's double entry, but not in a way that is immediately obvious for a lot of use cases.
- peteretep 11y ago
  If you can explain to me which use cases it doesn't support, I'd be interested...?

e12e 11y ago

I'm curious about this. I thought double entry book-keeping was mostly an artefact of manual/analog book-keeping. Humans are notoriously error-prone, and it's easier to avoid errors when two sets of numbers are supposed to balance out (ideally, exactly). How is double entry beneficial once all transactions are documented digitally? Could you give a somewhat concrete example? (Contrived or otherwise)?

peteretep 11y ago
Double-entry refers to the number of accounts related to a transaction, rather than the process of entering it twice. When you think about it, all transactions have naturally (at least) a from and a to account. In the simplest example, I move $100 from one checking account to another. This is a pain to model in a spreadsheet, where I literally create two entries, but very easy to model in an electronic dual-entry system where I create a single transaction with a from and a to end point, and an amount. Consider if I decide to buy a stock from my checking account. The from is my checking account, and then there are two "to" accounts - an account which models the value of the stock, and an account for the vendor's charges for the purchase. I might decide to aggregate all such bank charges to a single virtual account for this purpose. In this case, that virtual account would be the same as a "category" in a spreadsheet based model. It can also make budgeting and cash-flow visualization easier. I have a virtual account called "Holiday Budget", which makes a transaction to another virtual account called "Spent on Holidays" of $x every month. Whenever I spend money on a holiday item from my checking account, the "from" is my checking account, and the "to" is my "Holiday Budget". This keeps my net-worth and budgeting reports very simple - they say I spend the same $x on holidays every month - while accounting for some very lumpy spending. I can easily see if I'm over or under budget by looking at the value of the virtual account "Holiday Budget" at any point. It makes recording the value of unconventional assets easier. When I buy a laptop, I create a new account for the laptop, and transfer the money from my checking account to the virtual account that represents the value of the laptop. Every month, I draw down money from the laptop account in to an account called "depreciation". This helps me keep my budget reports insulated from lumpy spending too. A big use-case as well for me is the purchase of expensive refundable plane tickets - essentially, I buy personal futures in plane tickets when I see a good price. The virtual accounts that dual-entry allows means that when I buy a refundable ticket, I treat it as an asset in a virtual account until it's used. Again, this helps me track my spending and budgetting more effectively.
- zrail 11y ago
  > A big use-case as well for me is the purchase of expensive refundable plane tickets - essentially, I buy personal futures in plane tickets when I see a good price. The virtual accounts that dual-entry allows means that when I buy a refundable ticket, I treat it as an asset in a virtual account until it's used. Again, this helps me track my spending and budgetting more effectively. I would like to hear more about this. Do you have alerts set up? Does this end up saving you money? Do you get to re-schedule the flight an unlimited number of times (pushing the future out) or do you have to cancel and rebuy periodically? Can you use exercise the option early?
  - peteretep 11y ago
    It's far less sophisticated than this. A route I take regularly costs ~$2700-$5000. I refuse to pay more than $3000 so I tend to book all the dates I might travel ~6 months in advance, and cancel them if I don't need them, which costs about $50.
- saaadhu 11y ago
  Newbie to ledger here. Why not move $x from checking to Holiday Budget every month, and then track holiday spending by moving money from Holiday Budget to Spent on Holidays? Guess it throws off net worth calculations a bit, as you'd have to include the Holiday Budget as well in there. Are there other reasons?
  - sophacles 11y ago
    Check out this section and the following section of the ledger docs: http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Petty-Cash http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Pett...
  - peteretep 11y ago
    Because Holiday Budget isn't a real account, and my checking one is. If money didn't leave the checking account, it would show an incorrect budget if I marked that it had.
sophacles 11y ago
@peteretep gave a great reply - maybe better than this one, but here's my view on it: Stuff like this (and the next section) is easily doable: http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Petty-Cash http://ledger-cli.org/3.0/doc/ledger3.html#Dealing-with-Pett... A lot of the things you'll think to do in an electronic system, with tags and tables and so on, can ultimately be modeled by accounts in a double entry system, and probably just as powerfully once you add things like "virtual accounts" and the like. At some point, it's sort of like greenspun's 10th rule - any sufficiently advanced money tracking system will implement a version of double entry accounting in it.
mikekchar 11y ago
You can think of double entry accounting as unit tests for your financial books. It definitely does help in making sure that you don't make mistakes when you enter the data, but where it really shines is analysis after the fact. In Japan, the government actually gives me concessions for submitting my documents for income tax as double entry accounting. This is because it saves them huge amounts of money. So, if I document an expense that I want to get a deduction for, they can easily check that there is a corresponding withdrawal from the bank account to pay that expense. Especially for complicated areas, like my payroll, where I have up to 5 bank accounts in play (some of them off shore), it's absolutely the only way they can go back and understand what the heck is going on. Similarly, for me, I have sometimes gone back and discovered that I got an exchange rate wrong. Fixing that mistake is a nightmare (especially if you have to pay capital gains tax in a LIFO or FIFO manner -- you have to record the capital gains or losses for each "lot" of currency that you purchased). Double entry accounting will totally save your butt as you ripple through all your transactions changing the exchange rate for the foreign currency. If you get it wrong (i.e. over or underspend a particular "lot"), the numbers won't balance at the end. Is it necessary for your average person? Obviously not. As your finances become more complicated it kind of goes like this: intellectually interesting -> super cool -> crap, how did I get by without this? -> there is absolutely no other way to do it and not get arrested for tax evasion.