3 ms·

It's wrong in the sense that anyone who's studied standard accounting will look at your books and consider them to be incorrect. This is important if you want

It's wrong in the sense that anyone who's studied standard accounting will look at your books and consider them to be incorrect. This is important if you want to share your books or reports with your local tax office, who will begin investigating you for committing tax fraud. It's the same reason why no one fixes the HTTP "Referer" header typo. You can, but if you do then you'll have difficulty communicating with the outside world.

verytrivial 6y ago
> look at your books I think OP is encoding the sign-reversal internally though, right? It "displays" the two incorrectly classified account types exactly per the standard convention instead of re-applying the convention at every operation. All reports would follow the 'Classic' conventions. At least that was my reading!
- navaati 6y ago
  It doesn't, the Equity account displays a negative number if the company is in the green (it decreases when you emit stocks), the Expense account displays positive numbers (it increases when you spend money), the Income account displays negative numbers (it decreases when you earn money). In beancount, the accounting equation is Expense+Income+Equity=0 and all signs are always left intact (there is only addition). So you start a company with a seed capital of $5. You borrow $5 to the bank, buy an expensive apple for $10, sell it for $15 and give the money back to the bank with an interest of $1, then close the exercise and carry the profits (don't distribute dividends). Your ledger is: Initial capital Assets:Cash +5 USD Equity:Seed -5 USD Borrow to the bank Assets:Cash +5 USD Liabilities:Bank -5 USD Buy an apple Assets:Apples +10 USD Assets:Cash -10 USD Sell the apple Income:Sales -5 USD Assets:Apples -10 USD Assets:Cash +15 USD Reimburse the bank Liabilities:Bank +5 USD Expenses:Interest +1 USD Assets:Cash -6 USD Close the exercise # beancount does that for you for any time period btw Expenses:Interest -1 USD Income:Sales +5 USD Equity:PreviousProfit +4 USD Notice how every transaction balances to 0 just by summing it, no need to remember anything. Now, you're at the beginning of the next exercise. To know your accounts you just compute a sum of every operation to it, again no special case. So your accounts are: Expenses 0 USD Income 0 USD # as expected at beginning of exercise Assets:Apples 0 USD Assets:Cash 9 USD Liabilities:Bank 0 USD Equity:Seed -5 USD Equity:PreviousProfits -4 USD And yet again, the sum of all of that is 0. Personally I like it, not having any special cases. Yes, it may confused an accountant (because they learned the special cases by heart ! Somebody coming with a fresh mind has no reason to be confused, it's all just conventions !) but it's simpler for me and just as consistent.
  - verytrivial 6y ago
    FWIW I did an accounting elective at college and ran the books for a small business for a couple of years. I'm comfortable with the conventions :-) I was just saying OP was choosing to encode the conventions differently internally and display them a different way to meet the external convention, like GMT+TZ. You need never known your computer stores time in GMT and most people don't, even the accountants.

verytrivial 6y ago

> look at your books I think OP is encoding the sign-reversal internally though, right? It "displays" the two incorrectly classified account types exactly per the standard convention instead of re-applying the convention at every operation. All reports would follow the 'Classic' conventions. At least that was my reading!

navaati 6y ago
It doesn't, the Equity account displays a negative number if the company is in the green (it decreases when you emit stocks), the Expense account displays positive numbers (it increases when you spend money), the Income account displays negative numbers (it decreases when you earn money). In beancount, the accounting equation is Expense+Income+Equity=0 and all signs are always left intact (there is only addition). So you start a company with a seed capital of $5. You borrow $5 to the bank, buy an expensive apple for $10, sell it for $15 and give the money back to the bank with an interest of $1, then close the exercise and carry the profits (don't distribute dividends). Your ledger is: Initial capital Assets:Cash +5 USD Equity:Seed -5 USD Borrow to the bank Assets:Cash +5 USD Liabilities:Bank -5 USD Buy an apple Assets:Apples +10 USD Assets:Cash -10 USD Sell the apple Income:Sales -5 USD Assets:Apples -10 USD Assets:Cash +15 USD Reimburse the bank Liabilities:Bank +5 USD Expenses:Interest +1 USD Assets:Cash -6 USD Close the exercise # beancount does that for you for any time period btw Expenses:Interest -1 USD Income:Sales +5 USD Equity:PreviousProfit +4 USD Notice how every transaction balances to 0 just by summing it, no need to remember anything. Now, you're at the beginning of the next exercise. To know your accounts you just compute a sum of every operation to it, again no special case. So your accounts are: Expenses 0 USD Income 0 USD # as expected at beginning of exercise Assets:Apples 0 USD Assets:Cash 9 USD Liabilities:Bank 0 USD Equity:Seed -5 USD Equity:PreviousProfits -4 USD And yet again, the sum of all of that is 0. Personally I like it, not having any special cases. Yes, it may confused an accountant (because they learned the special cases by heart ! Somebody coming with a fresh mind has no reason to be confused, it's all just conventions !) but it's simpler for me and just as consistent.
- verytrivial 6y ago
  FWIW I did an accounting elective at college and ran the books for a small business for a couple of years. I'm comfortable with the conventions :-) I was just saying OP was choosing to encode the conventions differently internally and display them a different way to meet the external convention, like GMT+TZ. You need never known your computer stores time in GMT and most people don't, even the accountants.