Jun. 23rd, 2014

alexseanchai: Katsuki Yuuri wearing a blue jacket and his glasses and holding a poodle, in front of the asexual pride flag with a rainbow heart inset. (Default)
[personal profile] randomling expressed a desire to know, so:

Double-entry bookkeeping is the thing where any transaction is counted twice: once as an asset or liability, once as an income or expenditure, unless it is a transfer from one asset or liability to another in which case it is counted once for each of the two. This question came up in the context of GnuCash, which I use for personal finance, so personal finance is the context in which I will be explaining bookkeeping.

Assets are what you have. Money, car, house, yadda. Technically everything you own is an asset, but in practice I've found it's easier to count things like books and jewelry as expenses instead. Liabilities are what you owe. Credit cards, car loan, mortgage, student loans, yadda. Income is money coming in; expenses are money coming out. Equity is the number you get when you subtract liabilities from assets; that is, it is how much more you have than you owe, or how much more you owe than you have.

To do double-entry bookkeeping, you need a page for every asset account, a page for every liability account, a page for every income account, and a page for every expense account. (Fuck I'm glad I live in the computer age.) This is because every transaction will affect two such pages, and needs to be counted on each relevant page, and confusing the pages is bad.

Let's walk through a couple basic transactions. )

Have I thoroughly confused you yet?

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alexseanchai: Katsuki Yuuri wearing a blue jacket and his glasses and holding a poodle, in front of the asexual pride flag with a rainbow heart inset. (Default)
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