Home book keeping for the compleat Fetchie

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Dooogs Aug 2022 11:33am, 19 Aug 2022 8,998 posts	0 Dooogs If it made it a bit easier to track, Grep, you could have a month-by-month cash column but also have some rows at the bottom for your creditors, showing the creditor dropping over time as you paid the cash off...
larkim Aug 2022 11:33am, 19 Aug 2022 18,723 posts	0 larkim Yep. Is the widget something you are going to turn into something else to sell, or is it something you are going to use? Now, what you need is a monk sitting with the daylight over their right shoulder and you'll be on your way to understanding double entry bookkeeping. It's all a bit Newtonian - every action has an equal and opposite reaction. You buy (and therefore own) a widget to turn into something else and sell so you have some stock of raw materials and you have less money. You buy a widget on credit so you have stock and you have a liability. You buy a machine to turn widgets into thingummybobs, you have a fixed asset and you have less cash. You turn some widgets into thingummybobs and you have less raw material stock and more stock of goods to sell. You sell a thingummybob to a cash customer, you have more cash, less stock of thungummybobs and (hopefully) some profit that you ultimately owe to the business owner.
MazH Aug 2022 11:33am, 19 Aug 2022 11,547 posts	0 MazH I would probably ring fence the 10k in another account and only move it prior to the direct debit each month. To stop myself spending it....
MazH Aug 2022 11:35am, 19 Aug 2022 11,548 posts	0 MazH I would probably ring fence the 10k in another account and only move it prior to the direct debit each month. To stop myself spending it.... and then you'll only show £20k in your balance.... which is all you really have. Well that and a widget.
GregP Aug 2022 11:35am, 19 Aug 2022 138,462 posts	0 GregP I think in practice I'm going to go with Dooogs' method - but GR 65,067 is the answer I was groping for. Let's pretend I only have one account - we'll call it my current account. So Glenn is saying I have £30,000 in my current account and (£10,000) in a 'dummy' liabilities account, and in a year the numbers will be £20,000 and £0? I can live with that, just need an extra column. If I've got this right?
GregP Aug 2022 11:36am, 19 Aug 2022 138,463 posts	0 GregP I think my 138462 covers the MazH thing?
rf_fozzy Aug 2022 11:38am, 19 Aug 2022 18,043 posts	0 rf_fozzy This entire thread is gibberish! It makes less sense than the gravel thread.
Neal Aug 2022 11:42am, 19 Aug 2022 194 posts	0 Neal Here's an attempt to explain your first example. The spreadsheet you are imagining is just keeping track of one of several things happening. As Dooogs says, keeping track of the other stuff is probably more than you really want to do. If you want to record that the £10,000 in your bank account isn't "real", you need to need to keep track of more stuff, like your assets (cash, your widgets) and liabilities (how much you owe for the widgets). As a way to check on things, we use double entry bookkeeping and ensure that the double entries all balance out using a Balance Sheet. You start out by opening a bank account with £10k capital: Net Assets 10,000 Bank ====== Capital 10,000 Capital introduced ====== If you pay for the widgets, you reduce the bank to £0 and have £10k stock. Net Assets 10,000 Stock 0 Bank ---------- 10,000 ====== Capital 10,000 Capital introduced ====== If you take the loan, the bank account stays as it is, but you need to balance out the increase in stock with a negative amount of the same value: Net Assets 10,000 Stock 10,000 Bank -10,000 Creditor --------- 10,000 ====== Capital 10,000 Capital introduced ====== As you pay off the creditor each month, you record the payment as reducing both the amount in the bank and the amount owed to the creditor.
larkim Aug 2022 11:46am, 19 Aug 2022 18,724 posts	0 larkim The whole purpose of double entry bookkeeping, as dull as it sounds, is to make sure there's a home for everything, including more esoteric concepts like liabilities, capital, retained reserves etc. It's almost as if you've generated a thread for all of the accountants to come and revel in their expertise!
GregP Aug 2022 11:55am, 19 Aug 2022 138,466 posts	0 GregP Which is fine and good, just the level of my ignorance is astonishingly high. Is there a recommended 'double entry bookkeeping for beginners' website or book?