Double Entry Accounting for Developers
That&#x27;s the silly, confusing view of accounting.<p>Here is the smart view:<p>1. The sum of all accounts is zero: that&#x27;s the fundamental equation. Nothing about assets, liabilities or equity.<p>2. A transaction updates at least two accounts, by applying deltas to them. The sum of the deltas is a transaction zero. Because of that (1) continues to hold.<p>3. Accounts which represent outside interests in the business run negative: these include loans and owner&#x27;s equity. For instance, if the business somehow makes $1000 out of thin air, its cash account goes up by $1000. At the same time, because the owner has interest in the business, the equity goes down by $1000. Equity is like a loan that the business owes to the owner. Or, if the business gets a loan for $1000, the cash goes up; but the loan account goes down by $1000. Other accounts are what the business has, and run positive, like expenses, cash and assets. E.g. if a routine $50 expense is covered, cash goes down by $50, expenses goes up by $50.<p>4. Expensese are periodically reconciled (e.g. end of year): they cancel out equity. If there is -$1500 equity, and $500 expenses: poof: expenses are blasted to zero, and equity goes to $-1000. (Of course, expenses are also, separately of this, used for claiming tax deductions and whatnot.)<p>That&#x27;s it; no confusing debit&#x2F;credit nonsense, with an increase in such and such account being a debit, but an increase in another kind being a credit. That system is deliberately twisted so that people of typical intelligence need to rely on expensive accountants.