6 ms·

This claims 1 and -1 is confusing, then proceeds to use the confusion. Why not use the language of the problem domain? The rules are unambiguous. An increase i

This claims 1 and -1 is confusing, then proceeds to use the confusion. Why not use the language of the problem domain? The rules are unambiguous. An increase in assets are a DR, increase in liabilities a CR, in income a CR, in expenses a DR, in owners equity a CR. Decreases the opposite. Using 1 and -1 is nonsensical because their meaning in mathematics is fixed, while as shown by the rules above, in accounting DR/CR meanings change. So a couple of example journal entries… Product sale for cash Sales CR 100 Bank DR 100 Payment of rent Rent DR 50 Bank CR 50 Sale for cash where tax collected and owed Income CR 70 Tax Payable CR 30 Bank DR 100 Monthly petty cash tin entry Postage DR 5 Accounts receivable DR 20 (loan to John) Transport DR 15 (taxi Paul) Bank CR 40 Note that your bank statement is from the banks perspective. When you put money into the bank it is a CR because it is increase in the banks liability. Is this too hard to model? I suggest not?

sam_lowry_ 3y ago
Also, money is usually kept as integer of cents. It is clear, inambiguous and allows for other rounding rules that sometimes pop up in legislation.
- olivermuty 3y ago
  Money exists outside us dollar and should be stored ideally a a composite of currency and decimal or just a decimal. Then use currency specific rounding rules and always defer to CLDR [0] when displaying. 1. https://cldr.unicode.org/translation/number-currency-formats/number-and-currency-patterns https://cldr.unicode.org/translation/number-currency-formats...
  - jojobas 3y ago
    There is always a main currency for any entity, so any foreign currency dealings or having a reporting currency adds some fun in the form of changing exchange rates, realized/unrealized exchange rate differences, rounding errors and other shenanigans.
Ferret7446 3y ago
I think you think it's confusing only because you're not used to it. The two models are mathematically equivalent. The rules are unambiguous. Values which indicate capital are positive. Values which indicate ownership are negative. An increase in capital corresponds to an increase in ownership of said capital, which add up to zero. Perfectly balanced, as bookkeeping should be. I find CR DR to be more confusing than +/-, because the latter works out naturally with basic arithmetic, whereas the former requires this arbitrary DR CR crud, which are made up terms that literally mean nothing and you have to rote memorize how they apply to different accounts (and to add insult to injury, the terms often have the exact opposite meaning to consumers due to how banks present the terminology, which means the terms literally can mean either thing depending on the context).
- foota 3y ago
  I think where this would get confusing is that a positive number would have to decrease some accounts, but increase others, right?
  - jeltz 3y ago
    It does not because if you use + and - liabilities are negative and assets positive and if you add all balances the sum is zero. Actually the commercial accounting software I use works like that, it uses negative balances for liability accounts.
    - naasking 3y ago
      Exactly, it's completely unnecessary extra information that doesn't need to appear in the core data model that the user never directly sees. Extracting credits, debits, reversals, returns, etc. is all higher-level information.
jojobas 3y ago
Then you get to corrective transactions, where a normal return is Sales DR 100 Bank CR 100 while an annulled sales invoice is Sales CR -100 Bank DR -100 The point of using debit/credit vs +/- is just that, the ability to have correct account turnovers with corrections, and maybe some conventional understanding of what's an expense account in debit and what's a vendor account in credit.
- naasking 3y ago
  A return and an annulled sale are still credits and debits, respectively, when it comes to the mechanical sum being performed. The specific category of the action is higher-level information that doesn't need to appear at this level of the model.
mrkeen 3y ago
> Is this too hard to model? I suggest not? I'm sure I could put my mind to following those rules, but what's to be gained? If 'assets' and 'income' are opposites, and 'income' and 'liabilities' are the same, then I'm just not going to bother. What if my income is paid in assets in the form of $1 bills? CR or DR? And 'equity', Jesus is that a nebulous concept.
- FredPret 3y ago
  Equity is the most important of all - it’s simply what the business is worth to the owners if you sold everything
memset 3y ago
In my scheme, 1 always means DR and -1 always means CR. I use this, rather than the strings DR/CR, so the database can more easily do arithmetic to calculate balances. In order to do that arithmetic, we multiply the account's normal (again, 1 or -1) by the direction (1, -1) to determine if the amount represents an increase or decrease.

sam_lowry_ 3y ago

Also, money is usually kept as integer of cents. It is clear, inambiguous and allows for other rounding rules that sometimes pop up in legislation.

olivermuty 3y ago
Money exists outside us dollar and should be stored ideally a a composite of currency and decimal or just a decimal. Then use currency specific rounding rules and always defer to CLDR [0] when displaying. 1. https://cldr.unicode.org/translation/number-currency-formats/number-and-currency-patterns https://cldr.unicode.org/translation/number-currency-formats...
- jojobas 3y ago
  There is always a main currency for any entity, so any foreign currency dealings or having a reporting currency adds some fun in the form of changing exchange rates, realized/unrealized exchange rate differences, rounding errors and other shenanigans.

Ferret7446 3y ago

I think you think it's confusing only because you're not used to it. The two models are mathematically equivalent. The rules are unambiguous. Values which indicate capital are positive. Values which indicate ownership are negative. An increase in capital corresponds to an increase in ownership of said capital, which add up to zero. Perfectly balanced, as bookkeeping should be. I find CR DR to be more confusing than +/-, because the latter works out naturally with basic arithmetic, whereas the former requires this arbitrary DR CR crud, which are made up terms that literally mean nothing and you have to rote memorize how they apply to different accounts (and to add insult to injury, the terms often have the exact opposite meaning to consumers due to how banks present the terminology, which means the terms literally can mean either thing depending on the context).

foota 3y ago
I think where this would get confusing is that a positive number would have to decrease some accounts, but increase others, right?
- jeltz 3y ago
  It does not because if you use + and - liabilities are negative and assets positive and if you add all balances the sum is zero. Actually the commercial accounting software I use works like that, it uses negative balances for liability accounts.
  - naasking 3y ago
    Exactly, it's completely unnecessary extra information that doesn't need to appear in the core data model that the user never directly sees. Extracting credits, debits, reversals, returns, etc. is all higher-level information.

jojobas 3y ago

Then you get to corrective transactions, where a normal return is Sales DR 100 Bank CR 100 while an annulled sales invoice is Sales CR -100 Bank DR -100 The point of using debit/credit vs +/- is just that, the ability to have correct account turnovers with corrections, and maybe some conventional understanding of what's an expense account in debit and what's a vendor account in credit.

naasking 3y ago
A return and an annulled sale are still credits and debits, respectively, when it comes to the mechanical sum being performed. The specific category of the action is higher-level information that doesn't need to appear at this level of the model.

mrkeen 3y ago

> Is this too hard to model? I suggest not? I'm sure I could put my mind to following those rules, but what's to be gained? If 'assets' and 'income' are opposites, and 'income' and 'liabilities' are the same, then I'm just not going to bother. What if my income is paid in assets in the form of $1 bills? CR or DR? And 'equity', Jesus is that a nebulous concept.

FredPret 3y ago
Equity is the most important of all - it’s simply what the business is worth to the owners if you sold everything

memset 3y ago

In my scheme, 1 always means DR and -1 always means CR. I use this, rather than the strings DR/CR, so the database can more easily do arithmetic to calculate balances. In order to do that arithmetic, we multiply the account's normal (again, 1 or -1) by the direction (1, -1) to determine if the amount represents an increase or decrease.