On 27 Apr 2000 17:17:45 CDT, the world broke into rejoicing as
John Hasler <[EMAIL PROTECTED]> said:
> I wrote:
> > In fact, you can think of equity (capital) as a kind of liability: it's
> > what the enterprise would owe to the owners if all the assets were sold and
> > all the creditors paid.
>
> Richard Wackerbarth writes:
> > Yes, but you separate it because "Assets - Liabilities" is an interesting
> > number. "Assets - (Liabilities & Equity)" is, shall we say, boring.
>
> But useful in helping people understand double entry. If you think of
> equity as the money the enterprise owes you it is easy to see why you want
> to have the largest possible credit balance in that account.
The _problem_ with this is that the nature of the balances are always in the
eye of the beholder.
The fact that banks report in bank statements in terms of _their_ position,
which is exactly opposite to _YOUR_ position is probably the one that smacks
everyone most directly in the face.
The way I'd describe equity, in the company's books, is as the money that
the company owes the owners. Which agrees with what you both have said.
The _problem_ that likely confuses people a tad is that if we're talking
about GnuCash tracking someone's personal assets, that leaves a bit of
a question of who it is that the "debt" is to. In effect, you have to be
just a little bit schizophrenic about this. The balance sheet isn't exactly
"mine;" it's the balance sheet of _my estate_, which is just a little bit
distinct from me.
The problem now is the choice:
To try to:
a) To try to conform with the usual conventions of accounting, with
either "debits and credits," in _two_ columns, or with "positive
and negative" values, by pushing them into one column, or
b) Have all the balances "generally be positive," except when something
exceptional happens.
There's a dilemma here, in that both approaches are not _totally_
satisfactory.
Naive users, that don't _know_ debits-versus-credits, will find a)
to be somewhat unsatisfactory.
On the other hand, if there is a somewhat arbitrary set of rules that
"fiddle with the signs," as in b), if the signs get a bit confused,
the fact that there is an arbitrary transformation means that unsnarling
the confusion will be rather tougher.
My bias, personally, would be to go with a), with the hope that the
regularity of its behaviour is something that users can grow to recognize.
Supposing they aren't up to fully understanding it, throwing in the
transformations of b) make system behaviour more complex, and thus
_less_ predictable...
--
History of Epistemology in One Lesson
"First Hume said "We can't really know anything", but nobody believed
him, including Hume. Then Popper said "Hume was right, but here's what
you can do instead...". Bartley then debugged Popper's code."
-- Mark Miller
[EMAIL PROTECTED] - <http://www.hex.net/~cbbrowne/lsf.html>
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