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Accounting is not my area of expertise, but I have been learning it -- in simple terms -- by doing my personal accounts. When I started, I found these distinct

Accounting is not my area of expertise, but I have been learning it -- in simple terms -- by doing my personal accounts. When I started, I found these distinctions confusing, but I assumed they were wise. Now I find them arbitrary and annoying, although I am less confused by them. I suspect there will be a third stage where I will learn their true value. But I also strongly expect that the value lies in them being a common language that other accountancy uses. If so, then they will never be useful in my own personal accounts.

hosh 8y ago
Some mathematicians had constructed a group (Pacioli Group) to analyze the characteristics of using such a system. One thing a double-entry system can do that a single-entry cannot is to quickly verify the consistency of the transactions. The specific names of "debit", "credit", etc. are jargon. The properties that allow for quick verification works on more complex transactions. I might use a single-entry ledger for my personal finances (though I prefer the double-entry). I wouldn't run a business on it though.
- adrianratnapala 8y ago
  This is going far beyond my own knowledge. I only use double-entry. Or at least I use a style where everything is a transaction that adds up to zero -- there can be more than two accounts in a transaction. I don't even understand single-entry. [UPDATE: I am now pretty sure there is a serious misunderstanding my paragraph above, but think it is more constructive to note it, than to delete it.] My main objection was to making account types so so fundamental. From the POV of my account book "Assets:InTheBank" behaves just like "Liabilities:CreditCard". True, the later balance is almost always negative, but it is the minus sign and not the word "Liabilities" that matters. Similarly for transactions, a plus or a minus in front of a delta is less confusing to me than the equivalent accountant-jargon. But here, for some reason, I have more sympathy for accountants and their jargon.
  - hosh 8y ago
    I see. Thst makes more sense. I took an intro accounting class in a community college as well as microeconomics in high school, so I have an inkling where this stuff comes from. I look askance at stuff like "contra assets" too. But yes: boiled down, those are legacy words indicating positive or negative.
  - adrianratnapala 8y ago
    Let me explain my update from yesterday so it doesn't just hang there as a useless tease. My comment assumed that double-entry accounting meant that every transaction adds up to zero. But cgio links to which claims http://www.ellerman.org/the-math-of-double-entry-bookkeeping-part-i-scalars/ http://www.ellerman.org/the-math-of-double-entry-bookkeeping... that definition is a common misunderstanding. What cgio means by double-entry is adding up debits and credits as separate unsigned numbers, as opposed to a single signed one. The fact that the numbers only ever increase can help you verify the books. Indeed I've experienced the pain of signed numbers first hand when keeping accounts with pen-and-paper. I can't remember how exactly it worked, but it was something to do with how if I had monotonically increasing values, I could have put a strict time bound on where a missing entry had to be.
cgio 8y ago
Further to the sibling reply on Pacioli groups, you might find Ellerman interesting. I copy a link [1] but he has lots of material on his website, including a book. He discusses the group perspective of double entry and gets some extensions on e.g. multidimensional accounting mostly targeted towards his interest in property theory. [1] http://www.ellerman.org/the-math-of-double-entry-bookkeeping-part-i-scalars/ http://www.ellerman.org/the-math-of-double-entry-bookkeeping...

hosh 8y ago

Some mathematicians had constructed a group (Pacioli Group) to analyze the characteristics of using such a system. One thing a double-entry system can do that a single-entry cannot is to quickly verify the consistency of the transactions. The specific names of "debit", "credit", etc. are jargon. The properties that allow for quick verification works on more complex transactions. I might use a single-entry ledger for my personal finances (though I prefer the double-entry). I wouldn't run a business on it though.

adrianratnapala 8y ago
This is going far beyond my own knowledge. I only use double-entry. Or at least I use a style where everything is a transaction that adds up to zero -- there can be more than two accounts in a transaction. I don't even understand single-entry. [UPDATE: I am now pretty sure there is a serious misunderstanding my paragraph above, but think it is more constructive to note it, than to delete it.] My main objection was to making account types so so fundamental. From the POV of my account book "Assets:InTheBank" behaves just like "Liabilities:CreditCard". True, the later balance is almost always negative, but it is the minus sign and not the word "Liabilities" that matters. Similarly for transactions, a plus or a minus in front of a delta is less confusing to me than the equivalent accountant-jargon. But here, for some reason, I have more sympathy for accountants and their jargon.
- hosh 8y ago
  I see. Thst makes more sense. I took an intro accounting class in a community college as well as microeconomics in high school, so I have an inkling where this stuff comes from. I look askance at stuff like "contra assets" too. But yes: boiled down, those are legacy words indicating positive or negative.
- adrianratnapala 8y ago
  Let me explain my update from yesterday so it doesn't just hang there as a useless tease. My comment assumed that double-entry accounting meant that every transaction adds up to zero. But cgio links to which claims http://www.ellerman.org/the-math-of-double-entry-bookkeeping-part-i-scalars/ http://www.ellerman.org/the-math-of-double-entry-bookkeeping... that definition is a common misunderstanding. What cgio means by double-entry is adding up debits and credits as separate unsigned numbers, as opposed to a single signed one. The fact that the numbers only ever increase can help you verify the books. Indeed I've experienced the pain of signed numbers first hand when keeping accounts with pen-and-paper. I can't remember how exactly it worked, but it was something to do with how if I had monotonically increasing values, I could have put a strict time bound on where a missing entry had to be.

cgio 8y ago

Further to the sibling reply on Pacioli groups, you might find Ellerman interesting. I copy a link [1] but he has lots of material on his website, including a book. He discusses the group perspective of double entry and gets some extensions on e.g. multidimensional accounting mostly targeted towards his interest in property theory. [1] http://www.ellerman.org/the-math-of-double-entry-bookkeeping-part-i-scalars/ http://www.ellerman.org/the-math-of-double-entry-bookkeeping...