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

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NikolaNovak 5 hours ago | parent [-]

Thanks, 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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jeremysalwen 4 hours ago | parent | next [-]

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.

	▲	bc569a80a344f9c 4 hours ago \| parent [-]
		That’s a great way of explaining why this was historically done.

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4 hours ago | parent | prev | next [-]

[deleted]

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sebastianmestre 3 hours ago | parent | prev [-]

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.