Why do every explanation has to involve some arbitrary logic? I'm confused enough seeing "credit" and "debit", which is a standard accounting doublespeak, and this "Yin", "Yang" makes even less sense.
It boils down to only one principle: "Every transaction must balance". This is similar to the base natural law of energy conservation. There's no free money. Money going to one account has to come from somewhere.
The rest is convention, what we call income/revenue, expense, liability and equity, and how to structure our accounts and reports. It's all nicely explained in http://ledger-cli.org/3.0/doc/ledger3.html
Give ledger-cli a try. It has superb manual, and after reading it I stopped being cofused by bookkeeping terminology used elsewhere.
People who are new to book-keeping typically already have a mental model of it from bank statements. The salary is "credited", and withdrawals are debits. This notion muddles things up.
"Every transaction must balance" is a succinct explanation, but it is unfortunately even one more level abstract for someone not exposed to the very idea of book-keeping. The hope is that showing a few entries without being muddled in what is debit and what is credit territory, and how they relate to each other will trigger the aha moment a little sooner.
I guess the bank account thing would be confusing initially, but it really just needs to be explicitly stated upfront that the bank account is drawn up from the perspective of the bank, and your accounts are literally the inverse of the bank's accounts. The muddling up of debit and credit because of bank statements should vanish quickly after that.
While you're right about balance being fundamental, debit representing what you have -vs- credit representing what you owe is critical in understanding viewpoint, designing the balance sheet, and communicating with accounting professionals.
Why is this voted down? The author here isn't being flippant nor religious nor obtuse. Yin/Yang represent the idea that head/tail, good/bad, pretty/ugly are dependent on your perspective. When working with complex information, realizing that you can approach the problem from different perspecives is critical to communication.
Look at this poster's history. He's got a track record of thoughtful contributions -- this post is no deviation. Just because you don't understand what he's saying doesn't make his comment incorrect or irrelevant.
Thanks Clark for this comment. Downvotes without explanation doesn't help the poster understand what went wrong and fix it in the future. But I suspect it was the Yin/Yang analogy and lack of an introduction that flipped people.
The analogy is used to show how both debit and credit have a dual and interconnected relationship than the more simplistic notion of being opposites.
If anyone is interested in this way of looking at bookkeeping, here is a lengthier explanation with examples: https://github.com/jasim/bookkeeping
I think that the major challenge in understanding debits and credits is that different accounts have different 'signs' that may seem counter-intuitive.
For example, if you earn money (get revenue) this is something that you would typically consider 'positive', however revenue is a credit account and so the earning of revenue is actually a credit.
A simple trick is to recognize that balance sheet accounts have signs that align with our intuitive understanding of positive and negative, whereas income statement accounts are flipped. To grok why that is gets a little more tricky and the linked article seems to give a great basis for understanding that.
Source: I'm a Canadian CPA, CA (and CBV) and soon-to-be software engineer. I think this helps understand both perspectives.
> A simple trick is to recognize that balance sheet accounts have signs that align with our intuitive understanding of positive and negative, whereas income statement accounts are flipped. To grok why that is gets a little more tricky
For me, what made this less tricky, was thinking in terms of flows and their accumulation. A debit entry is a flow of value into an account, a credit entry is a flow of value out of an account (a debit or credit balance is simply an accumulation of those flows.)
We also believe that classifying expenses as debit-normal on the income statements, thereby obscuring their contra-income status is part of the puzzle.
Now replace Yin with Debit and Yang with Credit, and that's mostly it.