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faq: updates

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Simon Michael
2024-04-11 10:08:29 -10:00
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@@ -119,23 +119,36 @@ Practically speaking, in personal accounting you'll never use equity except
- when setting up starting balances in a new file
- when converting between currencies (optional, if you want to be [really correct](https://hledger.org/dev/hledger.html#equity-conversion-postings))
### Where are debits and credits ? Why do some balances look negative ?
### Where are debits and credits ?
Many plain text accounting tools use **signed numbers** in place of the traditional terms **debit** and **credit**.
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.)
Because of this convention, many PTA apps and examples show equity, liability, and revenue account balances as negative numbers.
Of course the debits and credits are still there.
But with this convention,
when you see a positive amount being posted in an account, it is a debit,
and when you see a negative amount posted, it is a credit.
(Or possibly a contra-debit or contra-credit respectively. "Contra" means "opposite to the normal direction".)
(Be warned of the usual pitfall that banks and businesses use "debit" and "credit" from their point of view, ie reversed, when communicating with customers.)
Newcomers to accounting find signed numbers much more intuitive and easier to learn than debit/credit terminology,
partly because they have less historical and didactic baggage.
(Some experienced accountants find otherwise.)
### Why do some balances look negative ?
Because of the signed number 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: 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.
More discussion:
More:
- [reddit: Is there any plain text accounting software which uses standard debits and credits?](https://www.reddit.com/r/plaintextaccounting/comments/18sbmsx/is_there_any_plain_text_accounting_software_which/)
- [hledger FAQ: Why are my revenue (income), liability, and equity balances negative ?](https://hledger.org/faq.html#why-are-my-revenue-income-liability-and-equity-balances-negative-)
- [reddit: Is there any plain text accounting software which uses standard debits and credits?](https://www.reddit.com/r/plaintextaccounting/comments/18sbmsx/is_there_any_plain_text_accounting_software_which/)
- [Hacker News: Double-entry bookkeeping as a directed graph](https://news.ycombinator.com/item?id=39988993)
### Which kind of account are loans ?