[zie]

> Where it can become confusing is when money leaves you or comes in from an external source. There are still two entries, but one entry is in one party's books and the other entry is the other's. For example, I get a paycheque and I enter my income in a little book with green paper and DB/CR columns. At the same time, my employer has entered an expense in their book. Double entries.

NO.

I mean your employer probably has a set of books, but that's not true in your own local set of books.

In your local set of books you would have something like:

    ACME, inc Employment Income  $100 DEBIT
    Bank Account                 $100 CREDIT

You are accounting for ACME, Inc's Employment expense in your set of books too.

When you send a payment to your Power Company:

    Power Company Expense: $100 CREDIT
    Bank Account:          $100 DEBIT

I mean if you are categorizing expenses you might do something like that. If you aren't, you might title one account "Expenses" and spend it all there, it doesn't really matter what you call the accounts, just that you are consistent.

[bregma]

Well, if I have a local entry

    ACME, inc Employment Income   $100 DEBIT

in my employment income account that money has not come out of thin air. Remember, money can not be created nor destroyed in this system. Somewhere there is a matching entry something like

    bregma, services rendered     $100 CREDIT

in my employer's books. And that money, in turn, was probably moved in from some other account internally. Mean time the only real movement of "money" was an electronic communication between two banks (my employers and mine), with a matching entry in an account in each.

Things like income accounts and expense accounts are not magic sources or sinks for money flows. They're just half of a double entry system with the other half somewhere else.

[zie]

I agree generally speaking, but what does that have to do with your local books? Nothing.

You almost certainly don't have access to your employer's books.

Also, the ledger entries for "bregma, services rendered" i.e. payroll will be much more complicated than that, there will be taxes, deductions, etc they have to account for as well.

[bregma]

> what does that have to do with your local books?

It's how double-entry bookkeeping works. Money can neither be created nor destroyed. On your local books you have an account where money goes and appears to be destroyed, but in reality there is a doubled entry in someone else's books. Just because you're unaware of it does not mean it does not exist.

And it's true that bookkeepers will have splits in their ledger in which one transaction consists of multiple entries, but that's a convenient shortcut for consolidating multiple items each of which is one half of a double entry. It has no bearing on how double-entry bookkeeping works and just needlessly complicates a description of the fundamentals. It has only to do with conventions for recording double-entry bookkeeping, just like using DB and CR to indicate whether entry is moving money into or out of an account.

[someguydave]

The fact that you have a counterparty with his own books has nothing to with the phrase “double-entry accounting”, it is a method of keeping your own books.

[zie]

> It's how double-entry bookkeeping works.

Sorry, but no. I have no idea why you think double entry means 1 of the entries is in some other persons books that you don't have access to is somehow useful. Double entry is 100% local to a singular set of books.

The point of double entry accounting is to avoid many simple mistakes. If you can't access a 3rd parties books to check, what is the point of double entry accounting, when you only hold a single entry?

I literally have no idea how you think this even remotely makes sense.

> Money can neither be created nor destroyed.

Totally as an aside, money can indeed be created and destroyed, the govt and even banks do it all the time[0]. But I agree practically speaking from an accounting perspective in a singular person/organizations books money isn't created or destroyed it's just moved around. But for double entry accounting, it's 100% not useful to talk about money in some other person's books, it's irrelevant.

0: BOE, Money Creation in the Modern economy an introduction: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[Delk]

Might be the slight fever talking, but wouldn't the debit and credit be exactly the other way around? When you get paid by your employer, in your books the money enters your bank account ("debit") and is coming from an (abstract) employment income account ("credit").

When you pay your power company, the money leaves your bank account ("credit") and enters the (abstract) power company expenses, utilities expenses, or whatever account ("debit").

[zie]

Just depends on which perspective you are looking at the books from.

From my perspective as the bank account holder and the person managing my own books, no.