Double-Entry Bookkeeping in Personal Finance
Double-entry bookkeeping has been a practice in business world for almost as long as accounting has existed. Why haven’t we seen it being widely adopted for personal finance?
Perhaps we can look at the benefits of using it in today’s businesses. Without a doubt, this system is useful for accountants and auditors to minimise error and detect frauds, as for every money debited to an account, the same amount of money has to be credited to another account, maintaining the balance. But this is not what benefits the company owners directly, certainly not to any individual wanting to adopt this system in their daily life.
In my opinion, double-entry bookkeeping is a system that can help individual to have a clear financial management at any single moment. It provides a clear and detailed picture of an individual’s financial health. We can have a look at our financial statements such as balance sheet for any period.
Since it provides a complete picture of both assets and liabilities, we can more effectively manage cash flow, plan for future expenses, and assess our income. By tracking accounts like revenue and expenses, we can make more informed financial decisions. Double-entry bookkeeping helps in better financial forecasting, as it provides a consistent and accurate way to assess current financial standing. Understanding your assets, liabilities, and equity allows us to make more accurate predictions for future financial performance.
In short, it is all about clarity and predictability.
I am doing an experiment on myself.
A double-entry bookkeeping system is almost impossible to be implemented on any spreadsheet application such as Excel, and professional software is too overwhelming for personal use. Therefore I am developing a web application that brings this double-entry bookkeeping to personal finance management, to both satisfy my curiosity and solve real financial problems.
It is undergoing development and internal testing. Various exciting features are being added. I know it will be available soon!
