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Accounting for Computer Scientists (2011)

186 points by tosh

by NikolaNovak

15 subcomments

I never understood double entry bookkeeping and that's where the author immediately loses me again:
Early on after 4th diagram, author includes sentence : "Because every transaction appears twice, once positive and once negative"
There is something so obvious about this to accounting folks that they always make the massive jump without any explanation. The previous diagram absolutely does not have positive and negative for each transaction! In fact, there is 5000 going into banking account and 500+5 coming out of it. Nothing in 4th diagram is obviously the negative of that 5k transaction, to me.
Similarly next sentence is "obviously" false: "If you partition the set of nodes into any two disjoint sets, and add up all of the balances in each set, then the sum for the one set is always the negative sum of the other set" -- the sum of the left two balances is minus five, and the sum of right three balances is 505.
And just like that, I'm completely lost and booted out of yet another accounting lesson without passing the introduction :-(
(fwiw, my experience of reading accounting is broadly the same as reading Plato: "it is obviously true that..." What, no, stop, that's not obvious at all, you gotta do better than that! :-)

by arn3n

0 subcomment

Double entry account is, in fact, what gave “transactional” databases their name: They were meant for financial transactions! Nowadays TigerBeetle is a custom built financial database just for double entry accounting. The implementation is fascinating.

by tomhow

0 subcomment

Previously:
Accounting for computer scientists (2011) - https://news.ycombinator.com/item?id=37940973 - Oct 2023 (50 comments)
Accounting for Computer Scientists - https://news.ycombinator.com/item?id=15446202 - Oct 2017 (1 comment)
Accounting for Computer Scientists - https://news.ycombinator.com/item?id=2298471 - March 2011 (75 comments)

by rahimnathwani

1 subcomments

The last time this was posted on HN (October 2023), I posted this comment which I think makes it easy to understand the fundamentals of accounting:
https://news.ycombinator.com/item?id=37951781

by dagss

1 subcomments

I read this article on HN ten years ago and it has been very important to me in a career working on a special purpose accounting (for automated reconciliation of bank accounts of a payments processor).
The biggest shift from conventional accounting is the use of negative numbers instead of debit/credit.
I believe that accounting would have been a lot more accessible to professionals from science/math backgrounds if negative numbers had been used instead of debit/credit.
I think biggest challenge to introducing negative numbers in accounting now is that people don't like the look of an income account accumulating a negative balance and the expense account accumulating a positive balance. But once you bend your mind around that it makes perfect sense...expense is where the money "went" (positive), income is where the money "came from" (negative).
(The alternative sign convention would make cash on hand negative.)
That said: Credit/debit does carry an extra bit of information, because you can put negative numbers as credit/debit to convey flow going the opposite direction of the usual one. (This can also be inferred from the accounts being credit-normal or debit-normal, just wanted to note it is not 100% the same model.)
My Norwegian small business accounting system vendor (Fiken) has started to present data using +/- in addition to debit/credit columns, perhaps there is some adaption of signed numbers accounting happening..

by poslathian

0 subcomment

This is the freshest take I have ever seen. Kudos, so cool.
My professional career has been 20 years of physical ai research and now industry. My dad insisted I take corporate accounting in undergrad.
It’s a skill I use every single day, double entry bookkeeping is one humanities great inventions and deeply related to conservation laws utility in various other areas. Could not have built my business without having gotten so into this Topic.

by memset

0 subcomment

I wrote an article on how to model a ledger with a DB. https://www.jaygoel.com/posts/building-a-scalable-accounting...
It addresses how to model dr/cr in a DB with positive and negative numbers, but still produce reports with positive numbers as expected

by Animats

0 subcomment

That's cash bookkeeping, which is well defined. The hard problems in accounting revolve around the time value of money and risk. Those are not as well defined. At best they are probability distributions.

by zzo38computer

0 subcomment

I had independently invented diagrams like that many decades ago. I had also made up a "matrix accounting", which uses a new accounting equation:
```
  <BAL|FSV> = 0
```
(It is assumed that <BAL| remains constant but |FSV> changes over time.)
However, I think that both the diagrams and the matrix accounting are not really practical compared with the double entry accounting, but that does not mean that they are not worth anything.

by kittikitti

0 subcomment

Accounting is just learning tax breaks, loopholes, and evasion. This article is weirdly written, as it claims accounting is just graph theory, and then provides the most convoluted way of calculating basic things like profit and loss. I recommend not reading this article at all.

by jimbokun

0 subcomment

This is so nicely presented it’s tempting me to have Claude whip up an implementation.
Just need aome form of graphic persistence then ways of summing across partitions of nodes to generate reports. And some convenience methods for adding transactions.
Final step would be to slap a CLI or UI on top of everything.

by amelius

1 subcomments

Those graphs look cool, but I'd prefer a growing log of entries, so you can see what happens over time and more easily roll back or fix things.
That's actually what's missing in this presentation: how do you deal with time?

by sakesun

0 subcomment

Double-entry accounting was invented at the time we tracked things with paper and pencil.

by kogasa240p

0 subcomment

As someone who failed an accounting class I will definitely read this.

by tnn000

1 subcomments

Can I replace Credit = From and Debit = To?