You gained $20 worth of assets, so the counterpart of the $20 leaving your bank account is countered by your assets-account gaining $20
Now each year your book loses 1/5th of its value, due to wear and tear (4$ disappearing from your assets-account), this is countered by your depreciation-account (4$ tax write off, every year!)
After 5 years, it is worth $0 according to your books, but you manage to sell it again for $10: your bank account gets debited for $10, while your capital-gains-account gets credited for $10
> And how about food? I can understand a book having a resale value I keep in my books, but once I've eaten the hot-dog I bought it is gone forever.
Perishable and consumable food wouldn't be counted as an asset in the first place. You spend the money - it's credited to your asset account (reducing the value of your cash-in-hand) and then debited from your expense account (reducing the value of your equity - or, in more layperson's lingo, increasing the total sum of the expenses you incurred during that period).
Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
> Of course it would be, asset is anything of value, you're confusing with subtypes of assets. Just mujhe liability is anything you owe regardless of for how long
If an office buys snacks on Monday for the office party on Friday, they're not counting it as an asset and depreciating it on their books.
If food production or delivery were part of the core business, it would be one thing, but in the context that OP's talking about, it would be overkill at best (and fraudulent, in extreme cases) to try and count a transient consumable as an asset on their books.
Depreciation isn't relevant here, again, you're confused in the types of assets, not all of them are depreciated, only some with some specific properties like time of expected user. Just read the definition of assets in any (accounting) dictionary, or try to record your snack purchase in real accounts and see which side of the balance sheet this account end up in (hint: inventories, assets).
Do you actually do that? When people are working late at the office and you order pizzas you put that into your inventory and then remove it as people consume the pizzas? I record that into a separate operating expenses account meant for this kind of fringe benefit, not into inventory.
Pretty small so I do the accounting as well, but I think I'd lose my mind if I had to record them into inventory. Then when they leave half the pizzas for the next day, I record that? No way.
No, nobody does this. GP is engaging in an exercise in pedantry, under the guise that it serves some pedagogical purpose. Personally, I don't think it's particularly useful to teach people about how things could theoretically be done, when it's much easier to show then how things actually are, but I'm sure there is some accountant nerd out there who is extremely meticulously tracking the total value of the gumballs on the secretary's desk as they are consumed.
you don't need to record the halves, nothing stops your pizza order to be automatically recordered as
-A_cash +A_inventory
-A_inventory + L_expenses
Sure, if your pizza is frozen and consumed in another period, your books will not reflect reality, but so what, when talking about the very basics of accounting you offset that misrepresentation of a simple example by gaining an important pedagogic benefit! Which one, though? What do you gain by denying that pizza is an asset, going so far as calling recognition of an asset as an asset a fraud (but only in extreme cases of 5 pizzas!) and bringing depreciation/core business in?
Perhaps this is obvious to you, but I don't see what I'm gaining by doing this. My inventory management system will have different things unless I'm also recording these pizzas in there for the day. And it will show my inventory valuation as fluctuating when I do things like lunch or dinner for the team. It really seems useless to me when running the business.
That's fine, many accounting practices eschew precision for simplicity, you don't mark-to-market everything, depreciation is linear, etc, so if you don't see any value in this, but only troubles with integration with other systems etc, then it's useless to you. But then the article wasn't about running a real business
The person you're replying to is confused, but that's because accounting can be confusing.
An account is fundamentally either an asset or a liability. When you buy something with a credit card, you've incurred a liability, and gained an asset, no matter what you've purchased. If you use a debit card or cash, you're trading one asset for another.
One of the basic asset categories is expenses. That's the confusing part! When you acquire an asset, which is consumed or otherwise has no book value, that's an expense.
So when you buy groceries with a debit card for a hundred bucks, that's a +100 in Expenses:Groceries, and a -100 in Assets:Checking. If you buy the same groceries with a credit card, it's +100 in Expenses:Groceries, and -100 in Liabilities:CreditCard. When you pay off the credit card, that's -100 Assets:Checking, and +100 in Liabilities:CreditCard.
Asset is overloaded here, because Expenses are not included in calculating net assets. It's confusing! I find it even more confusing that Income is a liability, which always gets lower. That's because whoever paid you had a liability to do so, which they met out of assets.
This is also why, when you pull a CSV of a checking account, purchases are positive numbers, and income is negative. A CSV of a credit card will have purchases as negative, and payments as positive. It's the difference between an asset account and a liability account. Again, not to be confused with net liabilities: Income is a liability, but not one you owe anyone, rather the contrary, Income just gets smaller and smaller (ideally! If it isn't getting smaller then your net assets will be shrinking, most of us can't afford that for long).
The main thing is that an account which fluctuates from zero to positive, or accumulates, is an asset account. One which fluctuates from zero to negative, or accumulates negatively, is a liability account. There are times when this matters, notably when you can take a tax deduction for expenses, that's a good example of why they're on the asset side of the books.
These are the sorts of comments that make accounting and bookkeeping more difficult for people who are learning it. It helps no-one to try to think of income and expenses as equivalent to liabilites and credits. They are merely on the same sides of the accounting equation.
Assets + Expenses = Liabilities + Equity + Income
Expenses are not assets. For example, depreciation is not an asset. It is the representation of the life of the asset getting used up. It is an expense, a pure expense. Interest paid on a debt is not an asset. It is a pure expense. There are no word games that turn these into assets, like you might have for a software subscription or a gas bill.
Expenses diminish the business. Unlike assets, they do not represent anything that can be liquidated. Income increases the business. Unlike a liability, it does not represent a claim against the business.
Why aren't expenses and income on the balance sheet? Because they are netted out into retained earnings for the period. Imagine a business that cannot have a liability. Its accounting equation would simplify to:
Assets = Equity.
Income increases equity, expenses decrease it. Is equity a liability? NO. It is a separate account category with a credit balance. Want to look silly? Do as I did when I was a young programmer who knew everything and confuse the two.
People not learning bookkeeping before writing accounting software (which is a lot more software than people expect) make many dumb errors that frustrate users, bookkeepers and accountants. A decent bookkeeping book (e.g. Bookkeeping for Dummies) goes a long way to familiarizing someone with how to handle double entry accounting.
> or try to record your snack purchase in real accounts and see which side of the balance sheet this account end up in (hint: inventories, assets).
Yeah, and as I said, this makes sense for a company for which food is a relevant part of their business, but in the context OP is asking about, nobody is tracking it this way.
It’s been 15 years since I took an accounting course. Why would my bank account be debited when the balance went up? Is a debit not negative? Is the cash balance presented as a negative?
Indeed this is confusing to most people (myself included the first time I dealt with it), since if your phone company says they’re giving you a credit, you're getting money.
Your bank account is an asset for you, so debits increase the balance while credits decrease it. This is also called a "debit normal" account.
Liability accounts are tracked in reverse and are "credit normal". You increase the value (how much you owe) with a credit to the account and decrease the value (payments you receive) with a debit.
One way to think about is you always "credit" the source of the money.
If you get money from somebody you "credit" them for giving you the money. You say "I must give you credit for having done this".
If money goes into your bank-account you don't credit your bank-account because money didn't come from there it went there. If you don't credit the bank account you must be doing something else and that is called "debit". When money goes to your bank-account you "debit" it because now the bank-account is more "indebted" to you. You don't have the cash in your wallet but the bank-account is indebted to you by that amount.
From the view-point of the bank-manager things are of course reverse. When you put money into your bank-account the bank-manager "credits" you-the-account (in their books) for having done so.
I guess a crucial thing to realize is that your bank-account in your books is a different thing from your bank-account in the books of the bank. It seems like there is only one bank-account, but two different parties (you and the bank) each have their own version of that "account" in their book-keeping system.
A double-entry book-keeping system is "subjective" in that it always describes things only from the viewpoint of whoever it is who is doing the book-keeping.
Yes! Because you can remove your deposits from the bank and they also have to pay you interest on that balance. Your mortgage is an asset to the bank for the opposite reasons.
In your books, your bank account is an asset, and therefore an increase in the balance is recorded with a debit. In the bank's books, it's the other way around.
I know it's a joke, but I think if an SLA involved putting a CTO in stocks and throwing eggs at him then that'd encourage me to sign up for the service. Especially if the video of it were posted after every incident.
Instead we get refunded some pitiful amount when our business is seriously disrupted for an extended period of time.
I have no skin in this game, but Jack clearly demonstrated that data is passing through servers that our controlled by US-owned entities - namely Cloudflare and Digital Ocean ... what am I missing ?
Copying what I said in another reply: I'm referring to move 133, right after Ian moved his queen from H6 to H7, attacking the rook. Magnus ignores this and moves his E5 pawn to E6. https://www.youtube.com/watch?v=PWkBeTwbfj4&t=29890s
BMW still does crash testing on finished products (end-to-end tests)... which would cover glove compartment too and how it affects overall safety... (perhaps it breaks up into pointy objects on crash, maybe it opens randomly during driving causing safety issues...)
You wouldn't build a car without doing test drives at the end... or crash testing... or certifications.
