2013-08-05

Taking Account

Time to study double-entry bookeeping. Ah, back to 1999!

"algorithm for a full set of accounting reports" - here
record the transactions in the appropriate journals
post the journals to the general ledger
prepare a trial balance
review balances and adjust trial balance as necessary
prepare profit and loss statement and manufacturing statement
close profit and loss accounts to income summary
close income summary to retained earnings
prepare balance sheet
prepare statement of changes in financial position
prepare statement of retained earnings
"debit versus credit" - Wikipedia
In summary: an increase (+) to an asset account is a debit. An increase (+) to a liability account is a credit. Conversely, a decrease (−) to an asset account is a credit. A decrease (−) to a liability account is a debit.

Assets = Liabilities + Equity (A = L + E)

Assets + "Expenses or Losses"
= Liabilities + Equity + "Income or Revenue" (A + Ex = L + E + I)
(extended)
"elements of accounting" - Wikipedia
Assets, Liabilities, Equity, Income and Expenses.
Difference between ledger and journal - Accounting For Management
The journal is the book of chronological record; the ledger is the book for the analytical record.
Aspects of transactions - Wikipedia

(So because some times you are updating two accounts whose Elements are on opposite sides of the Accounting Equation, you have to either credit both, or debit both, instead of crediting one account and debiting the other.
DebitCredit
AssetIncreaseDecrease
LiabilityDecreaseIncrease
Income/RevenueDecreaseIncrease
ExpenseIncreaseDecrease
Equity/CapitalDecreaseIncrease
Real, Personal, and Nominal accounts - Wikipedia

TypeRepresentExamples
RealPhysically tangible things in the real world and certain intangible things not having any physical existenceTangibles - Plant and Machinery, Furniture and Fixtures, Computers and Information Processing Equipment etc. Intangibles -GoodwillPatents and Copyrights
PersonalBusiness and Legal EntitiesIndividuals, Partnership Firms, Corporate entities, Non-Profit Organizations, any local or statutory bodies including governments at country, state or local levels
NominalTemporary Income and Expenditure Accounts for recognition of the implications of the financial transactions during each fiscal year till finalisation of accounts at the endSales, Purchases, Electricity Charges



Algorithms under study (includes mistakes):
GENERAL LEDGER

"buying stuff from supplier; payment directly from owner"

(1 - REAL accounts)

(1.1 - we got the stuff, and now owe some money)
"stuff (assets)" - debit this account
"accounts payable (current liabilities)" - debit this account

(1.2 - we partially paid what was owed)
"accounts payable (current liabilities)" - debit this account
"owners equity (capital)" - credit this account

(2 - PERSONAL accounts)

(2.1 - we got the stuff, and now owe some money)
"supplier (creditor)" - debit this account

(2.2 - we partially paid what was owed)
"supplier (creditor)" - credit this account
"owner (who paid)" - debit this account
"The pedagogy of accounting should involve an indisputable, machine-checkable, algorithm... there should be less guess-work involve. This is just like how they mis-teach math. " - random thought

Now my general ledger has a separation between all the Real+Nominal accounts, and the Personal accounts (which document some of the same transactions, just on a different index).

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