alt Hacker NewsThanks, I appreciate your answer, though sadly it does not move the needle much for me.
* the article still loses me because it defines transactions one way (the edges) and then seems to make this big switch that each edge/transaction is really two transactions suddenly (one on each side of the edge) .
Similarly the explanation In Wikipedia is completely contrary to my mental framework: "tenant who writes a rent cheque to a landlord would enter a credit for the bank account on which the cheque is drawn, and a debit in a rent expense account. Similarly, the landlord would enter a credit in the rent income account associated with the tenant and a debit for the bank account where the cheque is deposited."
I cannot even begin to parse that, and I'm honestly reasonably bright :-). Paying my landlord is "obviously" a transaction from my banking account (negative) into their banking account (positive). How it becomes four transaction is, as ever, the magic bit glossed over. That landlord is entering "debit for the bank account where the cheque is deposited" just feels like someone is yanking my chain.
Anyvoo! Like with French language, I'll try again one day :-). Merci!
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"the article still loses me because it defines transactions one way (the edges) and then seems to make this big switch that each edge/transaction is really two transactions suddenly (one on each side of the edge)"
Perhaps the word "transaction" should have been explained better. It doesn't mean an entry/record/action. It means a collection of several actions, all happening at the same time. Several actions that are interlinked and only can happen because of one another.
For instance, if I buy a house. "Ensuring the transaction" would be to make sure that a) I get registered as owner to the house and b) that the sellers gets my money. Either a)+b) should both happen (and those two things both happening is ONE transaction), or neither happens. (If I only give the money but don't get the house the transaction didn't complete/is invalid, but incomplete transactions are sort of out of scope for accounting systems)
Back to the article. An edge of 100 from X to Y means "move 100 from X to Y", which is the same as "subtract 100 from X and add 100 to Y, and those two entries belong together and should be done transactionally".
How else would you move money between two accounts if you did not subtract from one and add to the other?
Anyway: The edge is definitely not turned into 2 transactions. But, each edge causes two accounting entries, belonging to the same transaction.
>* the article still loses me because it defines transactions one way (the edges) and then seems to make this big switch that each edge/transaction is really two transactions suddenly (one on each side of the edge)
The author messed up by charactizing edges as one way transactions because in that moment he is only looking at the movement of cash. When he switches to edges being two transactions, he is now recognizing that the exchange of cash leads to the recognition of equities and liablities.
If you give your startup $5000 in cash, you expect to have $5000 in equity on the company books. When you charge to a credit card to buy food, you spend $13 buying food and paid $5 to your creditor so you still owe $-8 in liablities.
>Paying my landlord is "obviously" a transaction from my banking account (negative) into their banking account (positive). How it becomes four transaction is,the magic bit glossed over.
The magic of double entry is that you are only taking into account how your transaction affect your own balances. Thats why you need two entries, If you only debit your own account for rent, you would have a non-balanced set of books which would indicate that something is really wrong. So that why you have to credit Rent expense which is an account that doesnt track an actual balance in your bank account but a running total of all your rent expense for the year.
In the wikipedia example, you have your own set of accounting books and the landlord has his own set of books. That is how there are four entries, but you as an indivdual would only see and deal with your own double-entry.
Fwiw, I think the four in the wikipedia comes from two people using the double entry system simultaneously.
So it's two records in the landlord's own books which u dont necesarily know about, and two records in your books.
Double entry book keeping is just recording the "edge" in two places, once based on the source node, and once based on the target node. So you have a nice list of all edges coming from each node and a nice list of all edges going to each node. This was important before computers, since the process of looking up all edges going to/from a node would take real time and effort.
For your example of the landlord and the tenant, think, what if the landlord wanted a list of all payments that went into a specific bank account, what if the tenant wanted a list of all rent payments, etc. It's basically a database index to speed up those queries, but for a written database that is updates by hand. The fact that there is redundancy is just a bonus because you can now notice if the two places a piece of information are written down don't match.