Ian Lewis' Blog

Gnucash 2.2.3 was released the other day and contains my first contribution to the project. Albiet, a pretty small and lame patch for a small bugfix, but a patch nonetheless!! I hope to do some more work particularly on the QIF import, eventually making it work with the generic importer, and then expand my contributions to include improvements for multi-currency and reporting.

I just read a little review of Gnucash which is the accounting software I'm using to manage my expenses. It basically mentions that Gnucash is available for Windows now, and that it isn't likely to challenge the dominance of Quicken, or Microsoft Money any time soon. Those conclusions aren't surprising.

But what I read and keep seeing is that double entry book keeping is hard to understand for people without accounting experience. Like others on the internet, I'm allergic to BS. Why is double entry book keeping hard? Let me teach you what it is and why it's useful in a short blog entry, which will attest to how easy it is.

Double entry uses the concept of accounts. Accounts registers that tally money like how much is in your bank account or how much you've spent on movie tickets. It's just a running total or balance. Double entry is called double entry because it means that any time you make a change to an account you have to make a second change in another account (this is a transfer).

Accounts have 4 types. Asset, Income, Liability, Expense. These accounts oppose each other so if you transfer from an account on the left to one on the right or vice versa, one entry will be positive, one will be negative. It sounds confusing but it's really intuitive if you do it. So a transfer from an Asset account to an Expense account results in a negative entry in your Asset (e.g. bank account) and a positive in the Expense account, indicating you spent money on that expense.

Income <=> Expense
Asset <=> Liability

Conversely if you transfer from say a Income account to Asset account both entries will be positive.

That's it folks. That's all there is to it. No hidden wierd parts. No complicated exceptions. Of course some programs make variations on these accounts like calling it a credit card account. But it's really just a liability.

Anyway, double entry bookkeeping isn't a scary monster or anything. I knew nothing about accounting before using Gnucash and it took me less than a week to understand the concepts. Why do folks continuously say that double entry book keeping is hard? Frankly I can't understand how you could keep track of your money any other way.