Comment by dataflow
1 year ago
Could someone explain something fundamental to me about the need for double-entry accounting? Why can't your source of truth instead be proper SQL tables following these schemas (using Python tuple/list notation for convenience)?
transactions: [
(txID, timestamp, [
(accountID, delta, otherInfo),
...
], reason),
...
]
accounts: [
(accountID, routingNumber, accountNumber, ownerID),
...
]
Crucially, notice that "accounts" don't track balances here, and so I'm asking: why would I need TWO entries per transaction, and why would I need to do my own tracking of the balance of every account, when I can just keep a single entry per transaction in a proper ACID database and then build any view I need on top (such as running balances) with a battle-tested projection mechanism (like a SQL View) so that I still track a single source of truth?
what you’ve sketched out already looks like a double-entry bookkeeping system, if you have the constraint that all of the deltas in your array on your transaction sum to zero (so money always _moves_ and is not created or destroyed)
calling it “double” might be misleading - in the ledger systems I’ve worked on, a transaction that has only two entries - a single source and a single destination - is actually rare. In practice, a payment tends to have a source, the intended destination, a secondary destination for platform fees, possibly another destination for taxes.
And much more complicated situations are possible - I currently work in medical billing where there are multiple virtual internal accounts involved in each transaction for different kinds of revenue (including, for example, money we billed for but don’t expect will actually get paid)
so a transaction becomes a bundle of a set of several debits or credits that happen simultaneously and sum to zero. if you have that, you have double-entry bookkeeping, even if you schema puts it all in one table
Ahh thanks so much, that clears it up for me! Every description of double entry I'd seen so far seemed to have the notion of keeping a running balance for each account (and then having a separate transaction for each one where they all sum to zero) as a central feature, so I thought avoiding that would make it no longer double-entry, and it always puzzled me why that was so crucial. Your comment made me see that wasn't actually the point!
You transaction includes multiple entries. Your schema is multi-entry by definition :P
It's funny how many commentators here confuse debit/credit with double-entry.
SQL or not doesn't really matter. Double entry provides redundancy, and redundancy allows for auditing. It's like checksumming to detect errors.
I guess I'm asking: what would go wrong with the design in my comment, which makes transactions first-class and has a single entry for each one? What errors would double entry prevent that this doesn't?
You offered no design. Db schema has nothing to do with transaction guarantees.