Imagine if I gave you a cash loan. That cash (once in your hands) is an asset: the money is green as any other cash and you can use it for whatever you want. However, let's be honest: you have to pay this cash back. You really need a way to distinguish this cash from the cash you have that you don't have to pay back (the stuff you earned from your salary, for example).
The solution is the accounting equation: Assets equals liabilities plus equity. All of your assets can be split into two categories: Liabilities (assets you've got but have to pay back later) and equity (things you actually own). The double entry bookkeeping system keeps this equation intact. On Sat, Sep 24, 2011 at 11:37 AM, Craig Earls <[email protected]> wrote: > This is a basic question that I want to sort out for the > documentation. I am writing a section on suggested account > structure. In my (admittedly naive) personal journal I use Assets, > Expenses, Liabilities, and Income at the top level. My > 401K/IRA/Brokerage Accounts are all tracked under the "Assets" branch. > The documentation for "hledger" suggests five top level accounts, the > four I have plus "Equity". Is there a fundamental difference between > "Equity" and "Assets"? My basic understanding puts both terms in the > set of "stuff I control". > > PS to keep things straight on the list I will prepend the subject line > on all documentation specific threads with "[DOCS]". They may not be > of interest to the entire list, bu I hope you will all chime in. > > -- > Craig, Corona De Tucson, AZ > enderw88.wordpress.com > -- David Gilman :DG<
