To make fun of double-entry bookkeeping will bring on the fiercest ire [1] of many fellow accountants. Its concept is as sacrosanct as the modern ‘true and fair’ well known to auditors. But to make fun of it I will, so here goes.
I have this unproven, purely personal and perhaps ridiculous theory that accountants have maintained double-entry bookkeeping for six centuries to keep their profession alive. Its concept is so complicated and contradictory that only specialists can work it, understand it and communicate it. These specialists are accountants.
Here is a short summary of double-entry bookkeeping.
A debit in bookkeeping must have a credit. A debit is on the left and a credit is on the right. A debit is either an asset or an expense, it depends. A credit has three identities. It is sometimes a liability, sometimes revenue and once in a while equity, but never at the same time. This equity is not the one which conveys the quality of being equal or fair. This equity can be negative but never be positive. Negative equity is bad, positive equity does not exist, it is just equity. The sum of revenue debits less the sum of expense debits gives a profit or a loss. The sum of asset debits less the sum liability credits gives equity. A loss is a debit, a profit a credit.
Only accountants claim this is neither complicated nor contradictory. However, the level of complication forced accountants to invent the profession of auditor, to explain to non-accountants that the results given by this double-entry bookkeeping are true and fair, and that the accountants making the entries have done a good job, so don’t worry.
Now a minority of serious accountants accept that double-entry bookkeeping is complicated, but they will tell you that the advantages outweigh this minor disadvantage of complexity. But if you search for the advantages of double-entry bookkeeping over its cousin simple single-entry bookkeeping, you will find there are none. Single-entry does all the things that double-entry does with one difference.
Double-entry bookkeeping is more robust. I agree (perhaps because I am an accountant) but their reason: for every debit entry, there is a corresponding credit entry, is gobbledygook for a non-accountant. All they do is repeat what the supposed inventor of double-entry bookkeeping, Luca Pacioli, stated in 1495:
“All the creditors must appear in the ledger at the right-hand side, and all the debtors at the left. All entries made in the ledger have to be double entries—that is, if you make one creditor, you must make someone debtor.”
What they don’t say is that it is easier to forget something in single entry bookkeeping, so less robust. But non-accountants can work single-entry bookkeeping so we are back to the real reason and my theory for keeping double-entry bookkeeping: it keeps the accounting profession alive.
But why bookkeeping? Most of us read books then perhaps store them on shelves somewhere in the house. Accountants keep books, not as the opposite of throwing them away, but to record these double entry transactions, in what is the now well-known activity of bookkeeping, while the person who does the recording is of course the bookkeeper. To keep the imagery alive, accountants use ledgers, journals and charts as part of their books to help record their transactions.
Journalising is a possible bookkeeping activity; ledgering and charting are not. To ledger is a fishing term using ledger-bait or bait that stays in one place. To chart relates of course to the making of a chart or map, but never when bookkeepers make their ‘chart of accounts’, which is simply a list of accounts they have chosen for their business.
Nowadays accountants no longer keep their records in books even if the names, bookkeepers and bookkeeping have stuck. Records are kept in accounting software so bookkeepers should now be called ‘accounting softwarers’. But not any accounting software. They are now powerful, online,automatic, AI assisted, cloud based, streamlined, trusted solutions or better, not mere solutions but business management systems.
Now the concept of journals and ledgers is so complicated and the multiple definitions of journals and ledgers so confusing for non-accountants, that modern bookkeeping software has banished these terms. And yet any bookkeeper will tell you that they still exist even if only in their imagination. Accounts in the software are still ledger accounts to a bookkeeper and the list of entries to make is still a journal.
[1] ‘While with fiercest ire Bellona glows’, Matthew Prior, Ode to Queen 141,written in imitation of Spencer’s stile, 1706. Source: Oxford English Dictionary.
