How Does It Work?

[Geo]

What accounting system does Money use, and how does it work?

I learned the basics of accounting about 20 years ago. A college kid
taught me double-entry bookkeeping. It took him about an hour to
explain it. The system is simple, elegant, and powerful; I've been
using it ever since.

Fast forward to 2007. I'm looking for the first time at personal
accounting software. The first thing I noticed about Microsoft Money is
that it does not use the double-entry bookkeeping system. There is no
evidence of credits and debits. I can't figure out how to make an
income or an expense account. Ledger pages are inconsistent, showing
different columns depending on the "type" of account. All-in-all, it is
not what I've been taught to expect in an accounting system.

Obviously, Microsoft has chosen not to use double-entry bookkeping in
Money. That's okay; I don't mind change. My question, however, is this:
What system does Microsoft Money use? Does it have a name, a
theoretical foundation, and a track-record, or is Microsoft just making
it up as they go along?


-Geo

 

[Cal Learner-- MVP]

Obviously, Microsoft has chosen not to use double-entry bookkeping in
Money. That's okay; I don't mind change. My question, however, is this:
What system does Microsoft Money use? Does it have a name, a
theoretical foundation, and a track-record, or is Microsoft just making
it up as they go along?

Single-entry bookkeeping -- like an enhanced checkbook. You can have
transfers, so you can do some dual-entry-like things.

http://en.wikipedia.org/wiki/Single-entry_accounting_system

 

[Cal Learner-- MVP]

Fast forward to 2007. I'm looking for the first time at personal
accounting software. The first thing I noticed about Microsoft Money is
that it does not use the double-entry bookkeeping system. There is no
evidence of credits and debits. I can't figure out how to make an
income or an expense account.

Did you consider going to your bank and trying to open an income
account or an expense account?

Think of an account in Money as you would an account for banking,
credit card, or brokerage.

Think of "registers" that resemble transactions on statements.

 

[Geo]

Cal,

Thanks. I never heard of single-entry bookkeeping before. Frankly, I
don't understand it yet -- I mean, if you aren't balancing every
transaction, then how can you balance the balance sheet? In any case,
you've satisfied me that Microsoft isn't completely faking it; I'll
take a closer look.

-Geo

 

[Dick Watson]

I'd answer it a little differently: Since all transactions in Money are
entered in an account (asset/liability) and you can have a category
(income/expense) in (almost) all transactions, then it really is a double
entry system that disguises this since most people have zero
background/interest in double entry accounting arcana. (Indeed if you told
most of them that Money was double entry accounting rather than personal
financial management, they run, not walk, away from the product.) You can
use various reports to get at a quasi- balance sheet, etc.

 

[Dick Watson]

I agree your solution looks like a good workaround to Money's sad omission
of any features for people who have moved beyond the savings phase of life
to the distribution phase of life.

But I wouldn't call creating separate expense and income transactions out of
money that was ALREADY your asset, just to get the Income in a way that
Money can report the distribution for tax-law purposes, a shining example of
double entry accounting technique. Quad entry, maybe. Indeed, in general,
double entry principles are why categorizing a Transfer is a non sequitur.