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

The first important thing to understand is that accounts are for accumulating information regarding value. We are so used to bank and credit card accounts which are about currency that people sometimes usually do not realise that accounts are equally ideal for accumulating transaction details relating to, for example, our home, our car(s) - one take into account each car - our investments, etc.

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

The next important concept would be to appreciate there are two distinct, overarching types of accounts that we can use inside our sets or books of accounts. One is called 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 this is that positive amounts entered in to the + column of a secured asset account signify increasing value; so �500 entered in to the + column of a secured asset account implies an increase in value of �500. However accountants may also have in their business accounts, what I call working accounts for home accounting, as other accounts of the asset type which are not strictly for an asset such as a car or home. Examples include accounts for asset acquisitions and for depreciation.

That other overall type of account is really 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 these forms of accounts imply more debt or even more liability, whilst a decrease of �200 represents less of a debt. You might think more debt means less value but it all depends on the reason that a liability account is being used.

serviços de contabilidade 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 to any true debts of a person 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 found 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 isn't always adhered to in a few 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 idea 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 an appropriate phrase!) all the financial areas of some financial entity. In business, an entity may be a department or a division, a sole-trader or even 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 can capture and make visible both the static and dynamic areas of the entity finances.

The practical effect is that a set of double entry accounts (the books) requires an account to store the full total financial value of the entity and also usually, some makes up about accumulating periodic changes with regards to increases and decreases to the overall value. The effect is what is termed a balanced set of accounts, related to an accounting equ
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