| You may not need double entry if you’re just tracking your personal checking account to see if you can pay your bill… but it still may help. You answered your own questions though. It’s useful for error tracking and consistency. As a simple example to explain how it can help from a consistency perspective - think about a tool like Mint or Personal Capital or Nerd Wallet. They let you sign into your bank account and use a GUI to track all of your transactions. Ignore any privacy concerns. If you have 5 credit cards (because points), 2 checking accounts (you+spouse), a savings account, brokerage, mortgage, etc - there’s a lot of room for money to jump between accounts. Now imagine that you don’t include your mortgage account in the app. Whenever you pay money… it looks like your net worth is decreasing. In these apps, it might show up as a “purchase”. But you’re actually getting richer (by paying off debt and gaining house equity). If you include the mortgage account, you get to bring “the other side” into scope - boom - you now have an accurate view of the world when you didn’t before. That’s kinda sorta ish comparable the value of double entry. One side doesn’t tell the whole story, but always tracking both sides does. Of course, the error-correcting part comes when there was a mistake or a correction that needs to be added. (Mortgage lended says balance is wrong?Here’s the sum of all transaction from checking acct to mortgage!). If double entry, both sides of a single tx have to match, and you don’t track the balance, you derive the balance from the sum of all transactions. So you theoretically can’t get a case where one ledger (eg mortgage) doesn’t match the other (eg checking). Helps a lot more when you’re a multinational bank with $1T and 50 million customer accounts. Another example is a cash registers in stores. There’s a much higher chance the balance of cash is wrong (more room for human error). Being able to compute the balance over time based on the transaction history is useful for determining register 5 keeps losing money. Every change in cash balance should match another transaction so the total value of business’s money doesn’t change. Or just confirming that once you bring the cash to the bank there will be enough balance to pay a loan. Does this directly impact you on a day to day basis? Maybe no. But I hope that’s a super simple illustration of why it’s conceptually useful and what “error tracking and consistency” means. |