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A New Domestic Accounting Model predicated on Domestic Well-Being
Summary of Rationale and Technical Introduction

Other articles on Domestic Well-Being Accounting (DWBA) have hinted concerning the new ideas where this new domestic accounting model is based. In this article, the rationale, ideas and concepts are summarised, using the coverage in a fresh book 'Accounting for a Better Life'.

Accounts

At its simplest, a merchant account is just a list of transactions relating to some section of financial activity or interest. The most familiar form of account is the bank statement that customers periodically receive from their bank.

The first important thing to appreciate is that accounts are for accumulating information about value. We are very much accustomed to bank and credit card accounts which are about currency that people sometimes do not realise that accounts are equally useful for accumulating transaction details associated with, for example, our home, our car(s) - one take into account each car - our investments, etc.

Accounts will usually have two columns, one for increasing (+) amounts and the other for decreasing (-) amounts.

Bookkeeping The next important concept would be to appreciate that there are two distinct, overarching types of accounts that we can use in our sets or books of accounts. One is named an asset account and another is a liability account.

The asset type account as its name infers, typically relates to storing transactions for assets such as for example bank accounts, houses, cars, etc. The idea behind that is that positive amounts entered in to the + column of an asset account signify increasing value; so �500 entered in to the + column of an asset account implies a rise in value of �500. However accountants may also have in their business accounts, what I call working makes up about home accounting, as other accounts of the asset type which are not strictly for an asset like a car or home. For example makes up about asset acquisitions and for depreciation.

That other overall type of account is a liability account. It is useful for accumulating debts and/or liability. We now have the reverse concept for the reason that increasing amounts e.g. �300 in the + column of the forms of accounts imply more debt or even more liability, whilst a decrease of �200 represents less of a debt. It might seem more debt means less value nonetheless it all depends on the reason that a liability account has been used.

Again, accountants mostly use liability type accounts for holding true debt amounts but again, have a need for other accounts of the liability type to mediate certain transactions. I make reference to these as working accounts in home accounting because they do not relate with any true debts of an individual or household; examples of they are for accumulating temporary information about asset acquisitions and growth in the value of a home.

Another area for confusion here pertains to the names for column headings used in the different software packages available to support accounting; in business, the convention is that debits (the + column for asset accounts and the - column for liability accounts) are traditionally in the left-hand column of every account, with the credits on the right (the - column of asset accounts and the + column of liability accounts). This convention isn't always adhered to in a few software packages, together with not always utilizing the headings, debit and credit.

Double Entry and the Accounting Equation

The last bit of theory to mention which lies in the centre of DWBA accounting is so-called, double entry. This concept appears confusing to people because it has two aspects. First, it is an accounting concept which relates to an approach for taking into consideration (there's a proper phrase!) all of the financial aspects of some financial entity. In business, an entity may be a department or perhaps a division, a sole-trader or perhaps a whole plc.

For domestic accounting, such an entity would frequently be an individual or perhaps a household. The point is that the accounts supporting these entities consider or model the totality of the financial aspects of the entity. Therefore, the accounts will be able to capture and make visible both static and dynamic aspects of the entity finances.

The practical effect is that a set of double entry accounts (the books) requires an account to store the total financial value of the entity and usually, some makes up about accumulating periodic changes in terms of increases and decreases to this overall value. The result is what's termed a balanced set of accounts, linked to an accounting equ
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