On 2024-11-23 10:08, David Warren wrote:
> I understand this answer, and agree that double-entry accounting does
> not need to be 'daunting', but I don't really agree that the typical
> 'basic' personal finance user is mostly going to make simple entries
> that credit a bank account and debit an expense account simply to record
> purchases. Here are just a few examples of 'basic' personal finance
> transactions for most users and require more thinking about how to
> record debits and credits correctly:
>
> 1. Receiving a paycheck (typically will require crediting an income
> account, and debiting various tax expenses, and possibly debiting
> 401(k) or similar asset accounts, along with one's bank account)
> 2. Transferring money between bank accounts
> 3. Making a mortgage payment (which probably requires crediting a bank
> account and debiting each of an interest expense account and a
> mortgage liability account)
> 4. Recording interest or dividend income on investment asset accounts
> 5. Selling an asset for a profit, which has been the source of dozens
> and dozens of recent emails as people argue about how to record this
> correctly in DE accounting. ...
To which I would add
6. Paying for a purchase with a credit card or by taking out a loan.
Usually the initial purchase involves debiting an expense or asset
account and crediting a liability account. Then when making a
payment on the credit card or loan, which is the general case of
number 3 above, there's debiting that liability and possibly the
interest expense account, and crediting the checking account (an
asset).
Stan Brown
Tehachapi, CA, USA
https://BrownMath.com
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