Double-Entry Accounting - Based on Logic

Unlock the power of double-entry accounting, moving beyond the traditional concepts of 'debit' and 'credit'. Discover a modern approach designed for today's business world that focuses on what truly matters for achieving financial clarity and effective management.

In 1494, when Luca Pacioli described the bookkeeping principle, only mental arithmetic was possible. With mental arithmetic, almost everyone can only add a column of numbers if all the figures have the same sign — the "plus". Thus, a system had to be invented in that era with only one sign in each column. The mental math was the real reason for the "debit and credit" convention, and nothing else !

Since the 1960s, everyone is making digital mathematical additions. In German law, the P&L statement has changed to the scaggered form, with plus or minus in the colums. However, when it comes to the balance sheet, the convention from 1494 is still used in law at least in Germany

Many business administration experts were still unaware of digitalisation! Therefore, both the new method and the traditional convention are described in detail. For this, see the file 'i Business Management: Basics, Indicators, Examples' (Chapter 9).

Double-entry tables without 'Debit and Credit' offer a simply approach

It saves teaching time, as the author's simplified method makes it easy to grasp accounting principles. It eliminates illogical complexities. The system also avoids inconsistencies in the case of a company that is over-indebted (see in this website the page on assets and equity). By removing outdated jargon, accounting becomes logical. 

The headings show the four classes of accounts:
 -  Financial accounts and real asset accounts.
 -  Profit and loss accounts, and private (personal) accounts.
Every entry must be made twice. After every entry, the two checksums below (in the fourth-to-last line) must be equal. If this is the case, then your doubling has been done correctly, at least formally.

You can download this Excel table 'i Double-Entry Table Digital Logic' xlsx. Test the Double-Entry Table yourself !

The following double-entry table' (shown for a whole year, but shortened) proves that accounting theory can be understood without using the conventions  'debit' and 'credit'. However, you must pay close attention to the mathematical signs. Put simply:

- If the doubling crosses the thick black line in the middle, then the sign remains the same.
  See, for example, the three first entries and the entry 'Milk July'.

- If the doubling doesn't cross the thick black line in the middle, then the sign changes.
  See, for example, the years-end-entry 'Board and lodge to wage costs', where private living expenses are transferred to company's expenses.

At the end of the year, this double-entry table even shows the profit or loss, in the third-last line. 

For a detailed discussion, see the following files. This first article contains a long list of references.

In both files, you will also find descriptions of double-entry accounting, which was necessary before digitisation was invented. The latter file contains an additional five pages explaining the principles and German laws relating to the balance sheet (section 9.2). These pages may demonstrate the knowledge that was required for mental arithmetic at the time.