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! :-)

>I never understood double entry bookkeeping

It only makes sense in the context of a company. Yes you can shoehorn it into a personal context and/or treating it like some sort of database like hn's accounting posts love to do but that's not what the real accounting world looks like at all.

An accountant armed with a low/no code solution isn't going to write great code. That I think is obvious to every hn reader. But somehow hn gang think they'll reinvent a system that has been in place for 100s of years because it's backed by a different DB tech that's better suited to double entry.

I know a decent bit of both worlds so that disconnect in perceptions always amuses me.

[As a side note I don't think the average tech guy gains much from learning "accounting". Even that is a complete misunderstanding of what it is. Unless you're dealing with cap tables and corporate structuring you're better off doubling down on personal finances & taxes and risk management...not double entry]

edit: yes am accountant, yes can code..rust and python mostly, not amazing at either

> I never understood double entry bookkeeping

While I completely agree with you and have had the same experience, I'll try to phrase it in a way that might "click" for you:

1. An account is an abstract bucket that aggregates things of the same type. For example, the "Sales" account contains all the income from sales and the "Furniture" account represents the value of all the furniture. The "bank account" represents your dollars stored in the bank.

2. A transaction is an event where something of value is moved from one account to another. For example, when you buy furniture, money goes out of your bank account and is "transformed" into furniture. When you get paid, dollars go from an "Income" account to a "Bank account".

3. The goal of double-entry bookkeeping is to show both the source and destination of every transaction. For example, if you have furniture worth $375 in your possession, where did that value come from? Right, a transaction "debited" the furniture account by $375 and also "credited" the "bank account" with the same amount.

I suspect the original article only makes sense if you already have a solid understanding of both graphs and double-entry bookkeeping though...

Every time it comes up in my life, I search for an easy answer, yet I haven't found one yet. It reduces errors, makes it easy to track things and other reasons... all don't make sense to me if there is no physical bookkeeping involved. I am nearly convinced the reason is simply: It has been done like that for centuries. That's it.

Accounting generally wouldn't depict it this way, and it's quite confusing with the bubble diagram. I always found it easier when looking at things called "t accounts" [1]

Anyway, for the example you mention, it's supposed to mean that it takes 5k from the bubble on the left (founder) and gives to next bubble (bank)

Then each line again takes from left and gives to the new bubble on right. So each line is a transaction that balances out by adjusting both sides.

[1] https://en.wikipedia.org/wiki/Debits_and_credits

> Early on after 4th diagram, author includes sentence : "Because every transaction appears twice, once positive and once negative"

This isn't quite right, but it is a simplification that works here.

> 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.

Yes, those are two separate transactions. Each arrow is a transaction, and each of the accounts that it connects reflects the transaction (one as a positive, the other as a negative.)

> Nothing in 4th diagram is obviously the negative of that 5k transaction, to me.

The arrow with the $5000 has both the positive and the negative.

Each arrow (each edge of the directed graph) represents a "negative" for the account at the tail and a "positive" for the account at the head.

Money must flow from a source to potentially multiple destination. Because of that previous fact, you must have at least two postings per transaction (the double in double entry). If you manage to move money correctly without any errors, those postings in that transaction will add up to zero, making it trivial to verify you've done everything correctly without any errors.

> The previous diagram absolutely does not have positive and negative for each transaction!

But it does. The $500 transaction for furniture is an edge from the bank to the furniture asset account. This edge is outgoing from the bank account (-$500) and incoming to the furniture asset account (+$500). That’s it, that’s double entry bookkeeping. Each edge represents both entries.

I wrote this a long time ago. It does tend to upset some people, but it did work as an accurate and testable mental model:

https://django-hordak.readthedocs.io/en/latest/accounting-fo...

Double entry bookkeeping is a view that was confused for a model centuries ago, and has persisted ever since.

There have been attempts to correct this, such as the "Resources, Events, Agents" (REA) model[1], which according to the Wikipedia article "is a standard approach in teaching accounting information systems." But it doesn't really seem to have had a substantial impact on the practice of accounting.

The bottom line from a modern system design perspective, is that double-entry accounting makes much more sense if you treat it as a view of some more fundamental underlying model. REA provides one example of such a model.

[1] https://en.wikipedia.org/wiki/Resources,_Events,_Agents