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

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

Accounts

At its simplest, an account is just a set of transactions relating to some area of financial activity or interest. Probably the most familiar form of account is the bank statement that customers periodically receive from their bank.

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

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

The next important concept is to appreciate that there are two distinct, overarching types of accounts that we may use in our sets or books of accounts. One is named an asset account and the other 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 into the + column of an asset account implies a rise in value of �500. However accountants will also have within 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. buy aws accounts It is useful for accumulating debts and/or liability. Now we have the reverse concept in that increasing amounts e.g. �300 in the + column of the types of accounts imply more debt or more liability, whilst a decrease of �200 represents less of a debt. It might seem more debt means less value but it all depends on the reason for which a liability account has been used.

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

Another area for confusion here relates to the names for column headings used in the different software packages open 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 proper (the - column of asset accounts and the + column of liability accounts). This convention is not always adhered to in some software packages, together with not necessarily using the headings, debit and credit.

Double Entry and the Accounting Equation

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

For domestic accounting, this entity would most often be an individual or perhaps a household. The point is that the accounts supporting any of these entities consider or model the totality of the financial areas of the entity. As such, the accounts should be able to capture and make visible both the static and dynamic areas of the entity finances.

The practical effect is a group of double entry accounts (the books) requires an account to store the full total financial value of the entity in addition to usually, some accounts for accumulating periodic changes in terms of increases and decreases to this overall value. The result is what is termed a balanced group of accounts, related to an accounting equ
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