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Simon Michael
2024-04-11 09:49:05 -10:00
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@@ -65,7 +65,7 @@ In english, they are **Assets** (things you own), **Liabilities** (things you ow
In practice, two more top level accounts are used, making five.
In english: **Assets**, **Liabilities**, **Equity**, **Revenues** (or **Income**), **Expenses**.
Sometimes abbreviated to single letters; hledger uses A, L, E, R, X.
Sometimes abbreviated to single letters; hledger uses **A**, **L**, **E**, **R**, **X**.
Revenues and Expenses are essentially inflows and outflows during some period;
technically they are changes in Equity, reported separately for clarity.
@@ -78,13 +78,13 @@ More: [hledger: Accounting Basics](https://hledger.org/accounting.html#debits-an
It is a simple formula that always holds true when bookkeeping is correct.
You'll see it written in different ways, eg:
**Equity = Assets - Liabilities**
Equity = Assets - Liabilities
**Assets + Liabilities + Equity = 0** (using PTA's sign convention)
Assets + Liabilities + Equity = 0 (using PTA's sign convention)
**Equity = Assets - Liabilities**
Equity = Assets - Liabilities
**Assets = Liabilities + Equity + Revenue − Expenses**
Assets = Liabilities + Equity + Revenue − Expenses
[Wikipedia](https://en.wikipedia.org/wiki/Accounting_equation),
[Investopedia](https://www.investopedia.com/terms/a/accounting-equation.asp)
@@ -125,11 +125,9 @@ Many plain text accounting tools use **signed numbers** in place of the traditio
Of course the credits and debits are still there; in this system, whenever you see a negative amount being posted in an account, it is a credit, and when you see a positive amount posted, it is a debit.
Newcomers to accounting find this much more intuitive and easier to learn. (Some experienced accountants find otherwise.)
As a result of this convention, PTA apps and examples often show equity, liability, and revenue account balances as negative numbers.
Because of this convention, many PTA apps and examples show equity, liability, and revenue account balances as negative numbers.
You can get used to reading these signed-number reports in a day or two.
Just remember this to avoid a common confusion:
- When equity increases (more wealth!) or liability increases (more debt!) or revenue increases (more income!),
Just remember: when equity increases (more wealth!) or liability increases (more debt!) or revenue increases (more income!),
their balance is shown as a larger negative number (more negative).
Some PTA tools allow flipping the minus signs, or showing traditional debit and credit terminology instead of signed numbers.