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That makes sense to me in terms of assets and liabilities, but when I read https://beancount.github.io/docs/the_double_entry_counting_m... and it described income as being negative and expense as being positive, it broke my brain a little bit.



Very simple explanation: Entries in double-entry accounting always need to balance - you need two.

So if somebody gives you $100 in cash, you book that as $100 in your "cash" asset. But... the books must balance! And so, you need to book -$100 on the "income" side, because that's where the cash comes from.

If you're not happy with "because it needs to follow the rules" alone, replace "income" with "other people's money". For you to get cash, somebody else needs to give up cash.

The reason you differentiate between asset/liability and income/expense accounts is that you can't really fully balance the latter two. You don't know all the details happening to "other people's money". You know everything happening to your assets and liabilities.

As a result, income/expense are accounted over time ("I made $x/year") while assets liabilities are a value ("I have $357 in my cash drawer") - for the former two, all you know is the delta over time you cause.


Maybe the following will help. It might not click immediately but, when it does, there will no longer be any need to memorize what debits/credits are in the context of each of assets/liabilities/equity.

Think of "shareholder's equity" aka "owner's equity" as being a liability. After all, doesn't a company owe all its earnings to its owners?

Now, consider that:

- all income is a liability owed to shareholders. So any new income is an increase in the amount owed to these shareholder 'creditors', represented by a credit entry

- similar but opposite reasoning says that a new expense is represented by debit entry

If you feel uncomfortable seeing shareholders in the same category as creditors, consider that companies can choose two ways to fund themselves: equity (which creates shareholders) or debt (which creates creditors).


That's because it's just wrong, like everything from the docs of ledger and its descendants (and every "accounting for developers" article, except surprisingly not TFA here!), and accountants are just correct to use unsigned numbers.

A credit entry is a source, and a debit entry is a sink. When I do $4000 worth of consulting services work for Joe Bloggs, this gets entered as a $4000 credit to Income - Consulting Services (the source of the flow of funds), and a $4000 debit to Accounts Receivable (the destination of the flow of funds). Income, here, represents the outside world from the perspective of my business. Later, the receivable becomes cash when Mr Bloggs writes me a check, so I credit Accounts Receivable $4000 and debit cash (actually something like Assets - Coolbank Business Checking) $4000.


This makes a lot more sense to me. Source and sink. And I think illuminates why double-entry is confusing to non-business individuals, because we don't tend to think of Accounts Receivable for our persons.


An income is something you owe to your shareholders. So if you think of what you own as (+) and what you owe as (-), which is how debut/credit is conventionally shortcut, an income is a negative number.




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