Re: double-entry bookkeeping unneeded?


"Doc O'Leary" <droleary.usenet@xxxxxxxxxxxxxxxxxx> wrote in message
news:droleary.usenet-A69DD5.07210629122006@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
I'm not so sure that's a bad thing. The point I was trying to make is
that instead of a system where a group of transactions taken as a whole
is balanced, it is perfectly reasonable to have a system where each
transaction is itself balanced. For your example, it'd go something
like:

check payment 100
payment interest 98
payment principle 2

This also supports encapsulation better because the details of how the
payment is broken up is really an internal matter, and the parts of the
system that track incoming checks really shouldn't be exposed to the
details of a split just to satisfy an old accounting practice.



The problem with this system is that you will end up with arbitrary parts of
transactions that don't make any sense.

Example:
transaction 12345
debit $10,000 from cash receipts
debit $2,000 from credit-memo
debit $1,000 from marketing program
credit $900 shipping
credit $1200 sales incentive
credit $9,800 inventory
credit $1,100 revenue

Clearly, the transaction balances. Also clearly, none of the credit amounts
are the same as the debit amounts. So, to make this work, using your
system, you would have to "randomly" allocate balancing amounts from one
account to the other, breaking input and output amounts. One example
break-up is below. Note: it is NOT POSSIBLE, using this particular
transaction, to create a series of records using your system that doesn't
create this effect:

debit 900 cash -- credit 900 shipping
debit 9100 cash -- credit 9100 inventory
debit 700 credit-memo -- credit 700 inventory
debit 1200 credit-memo -- credit 1200 sales incentive
debit 100 credit-memo -- credit 100 revenue
debit 1000 marketing program -- credit 1000 revenue

Now, in come the auditors. they want to know where the money from the
credit memo went... do we say that the 2000 credit memo went to 1200 in
sales incentives on a 700 inventory sale with only 100 going to revenue?
How nuts does THAT part of the transaction look?

This results is confusion. Auditors WILL DEMAND to see the tables. The
tables need to make sense to them. They will want to use ad-hoc reports.
They will ask why there were two credits to inventory for this transaction,
and why there were three debits from credit memo.

On the other hand, if we logically store a single table like the first
example above, these questions DO NOT ARISE. It is easier for the business
to use the data if we don't randomly partition it in completely arbitrary
ways.

We are still quite normalized. The table simply has fields like
transaction id
account
amount
reference id

In my 'logical' breakdown above, I put in the words 'credit' and 'debit' but
in reality, we would use positive and negative numbers. Select all the
records for a transaction and you have a sum() that yeilds zero. The math
is simple. There is no arbitrary alignment. The auditors won't spend extra
money, every year, as we educate them on our REALLY ODD way of recording
numbers.

In addition, the code is simpler.

What's so bad about this?
--
--- Nick Malik [Microsoft]
MCSD, CFPS, Certified Scrummaster
http://blogs.msdn.com/nickmalik

Disclaimer: Opinions expressed in this forum are my own, and not
representative of my employer.
I do not answer questions on behalf of my employer. I'm just a
programmer helping programmers.
--


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