The Madness of Double-Entry Credit/Debit Accounting
IMHO as of now etc etc,
Double-entry bookkeeping (http://www.accountingcoach.com/online-accounting-course/60Xpg03.html ) has two aspects to it, the aspect of more than one entry being made for a given transaction, and the aspect of labeling one entry a credit and another entry a debit, and keeping a chrono record of the credit/debit labeled entries, in which each transaction is generally recorded as two equivalent numbers one a credit number and the other a debit number.
The esteemed accountingcoach.com considers both aspects to be elemental in the double-entry accounting which he revers, promotes, and declares to be the basis of modern manual and computerized accounting. "Accounting Coach" spends much of his time and energy, and much of his students' time and energy, attempting to explain the intricate details regarding when and how two entries one a so-called quote credit unquote and the other a so called quote debit unquote entry are made for a single transaction.
"Accounting Coach" and investorwords.com agree that for complex organizations double-entry is necessary and common, and they agree that double-entry generally involves recording each transaction chronologically as both a credit and a debit that are the same except for the one being a credit and the other being a debit.
This apeears to indicate the presence of jaw-dropping amazing incompetence in the accounting world, because the compulsion to record a given transaction as both a debit and a credit, is a source of fundamental irrationality and confusion.
Hopefully the real world is not what accounting coach and www.investorwords.com say it is, a place where accountants compulsively record some but all transactions as both a credit and a debit the two numbers being the same except for one being labeled a credit and the other being labeled a debit. Hopefully the world sees the wisdom of manually or via machine recording a given transactions in more than one account, while it has the wisdom to forget about classifying each recording of info as a debit or a credit. But for now we assume the world is what the esteemed sources accountingcoach.com and investorwords.com say it is, meaning insane.
Take for example when entries have to be adjusted to account for the fact that $1000 of work has been done but payment has not yet been received and the incident has heretofore been ommitted from the accounting records. In such event, the accounts receivable account in the balance sheet is increased by $1000, and the "service revenues" account is increased in the income statement by $1000. Accounts receivable represents "Money which is owed to a company by a customer for products and services provided on credit". Service Revenues represent "fees earned by a company including work completed whether or not it was billed". One is money owed for work done, the other is money earned for work done, yet an increase in the number representing money "owed" is treated as a "debit", and an increase in the number representing money "earned" is treated as a "credit". THIS MAKES NO SENSE.
Nevertheless vast amounts of time energy and money are expended explaining the arcane art whereby a change of statistic is identified as a credit or a debit and whereby it is known when changes of statistics must satisfy such rules of identification and whereby such changes of statistic satisfy rules re debits balancing credits.
The income statement is a snapshot of the most recent time period, the balance sheet is a cumulative record covering from the beginning on up to including what is covered in the income statement. The difference is merely one of time period covered. Thus to say that the stat covering work done for but not paid in the cumulative record is debited when it is increased, but the stat covering income earned by work but not paid for in the current time period record is credited when it is increased, is conceptually inconsistent.
The internet gurus may declare that double entry accounting is necessarily the accounting used today in complex organizations; but I now believe that the best form of accounting for such organizations would be to forget about what is called double-entry accountng which is basically the labeling of a change of statistic recorded in two places as being a debit in one place and an equivalent credit in another.
@2006 David Virgil Hobbs
Double-entry bookkeeping (http://www.accountingcoach.com/online-accounting-course/60Xpg03.html ) has two aspects to it, the aspect of more than one entry being made for a given transaction, and the aspect of labeling one entry a credit and another entry a debit, and keeping a chrono record of the credit/debit labeled entries, in which each transaction is generally recorded as two equivalent numbers one a credit number and the other a debit number.
The esteemed accountingcoach.com considers both aspects to be elemental in the double-entry accounting which he revers, promotes, and declares to be the basis of modern manual and computerized accounting. "Accounting Coach" spends much of his time and energy, and much of his students' time and energy, attempting to explain the intricate details regarding when and how two entries one a so-called quote credit unquote and the other a so called quote debit unquote entry are made for a single transaction.
"Accounting Coach" and investorwords.com agree that for complex organizations double-entry is necessary and common, and they agree that double-entry generally involves recording each transaction chronologically as both a credit and a debit that are the same except for the one being a credit and the other being a debit.
This apeears to indicate the presence of jaw-dropping amazing incompetence in the accounting world, because the compulsion to record a given transaction as both a debit and a credit, is a source of fundamental irrationality and confusion.
Hopefully the real world is not what accounting coach and www.investorwords.com say it is, a place where accountants compulsively record some but all transactions as both a credit and a debit the two numbers being the same except for one being labeled a credit and the other being labeled a debit. Hopefully the world sees the wisdom of manually or via machine recording a given transactions in more than one account, while it has the wisdom to forget about classifying each recording of info as a debit or a credit. But for now we assume the world is what the esteemed sources accountingcoach.com and investorwords.com say it is, meaning insane.
Take for example when entries have to be adjusted to account for the fact that $1000 of work has been done but payment has not yet been received and the incident has heretofore been ommitted from the accounting records. In such event, the accounts receivable account in the balance sheet is increased by $1000, and the "service revenues" account is increased in the income statement by $1000. Accounts receivable represents "Money which is owed to a company by a customer for products and services provided on credit". Service Revenues represent "fees earned by a company including work completed whether or not it was billed". One is money owed for work done, the other is money earned for work done, yet an increase in the number representing money "owed" is treated as a "debit", and an increase in the number representing money "earned" is treated as a "credit". THIS MAKES NO SENSE.
Nevertheless vast amounts of time energy and money are expended explaining the arcane art whereby a change of statistic is identified as a credit or a debit and whereby it is known when changes of statistics must satisfy such rules of identification and whereby such changes of statistic satisfy rules re debits balancing credits.
The income statement is a snapshot of the most recent time period, the balance sheet is a cumulative record covering from the beginning on up to including what is covered in the income statement. The difference is merely one of time period covered. Thus to say that the stat covering work done for but not paid in the cumulative record is debited when it is increased, but the stat covering income earned by work but not paid for in the current time period record is credited when it is increased, is conceptually inconsistent.
The internet gurus may declare that double entry accounting is necessarily the accounting used today in complex organizations; but I now believe that the best form of accounting for such organizations would be to forget about what is called double-entry accountng which is basically the labeling of a change of statistic recorded in two places as being a debit in one place and an equivalent credit in another.
@2006 David Virgil Hobbs
posted by David Virgil at 3:23 PM
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