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

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

Accounts

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

contabilidade organizada 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 all about currency that folks sometimes do not realise that accounts are equally useful for accumulating transaction details associated with, for example, our home, our car(s) - one account for each car - our investments, etc.

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

The next important concept would be to appreciate that there are two distinct, overarching forms 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 pertains to storing transactions for assets such as bank accounts, houses, cars, etc. The theory behind that is that positive amounts entered into the + column of an asset account signify increasing value; so �500 entered into the + column of an asset account implies an increase 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 accounts for asset acquisitions and for depreciation.

That other overall type of account is a liability account. It is used for accumulating debts and/or liability. Now we have the reverse concept for the reason that increasing amounts e.g. �300 in the + column of these 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 nonetheless it all depends on the reason that a liability account is being 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 refer to these as working accounts in home accounting because they do not relate to any true debts of a person 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 relates to the names for column headings used in the different software packages available to support accounting; running a 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 is not 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 at the heart of DWBA accounting is so-called, double entry. This idea appears confusing to people because it has two aspects. First, it is an accounting concept which pertains to an approach for taking into account (there's a proper phrase!) all the financial areas of some financial entity. In business, an entity might be a department or a division, a sole-trader or even a whole plc.

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

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