This is bad, don't read it. When you borrow $100 you do not create a liability which includes the interest to be paid.

People who don't understand the very basics of finance and accounting shouldn't write about finance and accounting.

The $100 does become a liability on your balance sheet. You’re right that interest doesnt and is an expense.

In the context of this post, does it matter? He’s not teaching bookkeeping here. He’s explaining the time value of money.

It was quite a good article if you don't care to nitpick over terminology. Too many technical people avoid the business side of things because they find it boring or are too cynical to engage with it, which limits their impact. Instead we get sleazebag money guys running the world.

The people who are in a position to influence the world are those who understand it, and if this article nudges people with a hacker mindset towards having more influence, then that's a good thing.

Yes, at the time of the initial transaction the borrower would not have a liability on their balance sheet that included the interest due.

Over the course of the borrowing period the borrower would accrue interest expense commensurate with the passage of time that would increase the borrowers total liabilities. The author misunderstands the fundamental accounting definitions of liabilities (and also assets). Liabilities (under US GAAP but same core idea under IFRS) are present obligations. At the initial time of borrowing the borrower does not have a present obligation to pay interest on the liability. Similarly, an asset is a present right, and at the time of initial borrowing the lender is not owed the interest.

It's not the worst thing I've read, the author has clearly spent time learning things in good faith. That said, there are lots of indicators the author is not an expert in accounting / finance.

You are fixating on one tiny point which isn't really that important within OP's ... errm "opus".

Why not critique the entire work?

Anyway:

I borrow 100 from someone. I am now in debt and they are in credit - to balance, both are 100.

However, they require a return on investment - usury: 10 for 100 (or a 10% margin - call it what you like).

When I take out my loan, I am in debt for 110 and they are in credit for 100 with a promise of 10 later. So we have some accounts - my one account is 110 in debit (I borrowed 100 and promised to pay 10 on top) and they have two accounts - one for the principal (100) and another for the 10 interest. To me, in this case, the principal and interest are part of the same account but to the lender they are separated out because the interest is probably taxable as income.

However, it might be the case that I can set off my debt or the interest on my debt against some tax. In that case I will maintain two accounts - the principal and the interest.

All those interests will also end up in additional accounts related to probably banking.

I've probably pissed off a few accountants with my choice of terms but in the end I do understand how fiat money works.

What gets on my tits is assertions such as "People who don't understand ..." with no working.

the US treasury secretary was on calls about whether to bail hedge funds out of gamestop to prevent cascading financial system failures. arguably there is nothing that is too dumb to be written about finance. dont let anyone discourage you.

If you take that logic to its natural conclusion HN would shut down.

But it says 'calling all hackers' so it must be the inside scoop.

Balance sheets and accounting are made up. You know in maths how you could do calculations on two different ways and arrive at the same result? That's what the author is doing. "Proper accounting" is how you do it, but you could actually just think of it this way. It makes no difference to the end result.

A very nit picky comment.

In avg, the normal way it creates the liability over time and i would argue that in a colloquial its absolutly fine and doesn't change the message at all.