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Implementing Domestic Well-Being Accounting
Accounting Package Architectural Issues
'Accounting for a Better Life' is primarily about the introduction of a new
Accounting Model for Home and Personal accounting, based on so-called, Domestic Well-Being.
As an accounting model, emphasis is given to the structure and relationships
between accounts, transactions and processes.
In thinking about implementing the concepts behind any accounting model
on a general purpose accounting package, there are some architectural
aspects to be considered about the way accounting packages address and
handle your accounts.
Most personal accounting packages focus their scope to simple or single
entry accounting, as opposed to double entry accounting, typical of
business accounting. This is not to say that double entry
accounting cannot be achieved using a general-purpose single entry
accounting package, which is exactly what the author did for his first
implementation!
A central feature of the DWB accounting model is the use of a simplified
form of double entry, for the very good reasons explained in the book
and summarised in an article on
Rationale and Technical
Introduction.
Comprehensive accounting models usually address both the real and
tangible assets of an entity or household, such as a home and car, as
well as its (personal) liabilities like a mortgage and a car loan.
In contrast to these 'real' concerns, consideration needs to be given to
the transactions occurring over some period that will lead to changes in
overall domestic wealth; these are the subject of so-called nominal
accounts in terms of income and expenses. For a home, these will
include food and drink, utilities and holidays - just for starters!
The next important architectural issue relates to how income and
expenses are handled in general purpose accounting packages; and
there are at least two distinct approaches.
Following the more traditional business accounting practices, one
approach is to allow the creation of proper nominal accounts in the book
of accounts, for each component of the structure of the income and
expense transactions. At the end of an accounting period, the
contributions to change are passed through the accounts from the nominal
group, eventually to the business Capital account or for home and
personal accounting, a Domestic Wealth account - see Accountz, below.
The alternative, promoted by Microsoft Money©
and others is the use of categorisation, whereby each transaction can be
tagged to a category associated with the particular type of income or
expense, like food, salary or car repairs. By analysing the value
of all the categories at the end of a period, the total effect of all
the accumulated changes can, as for nominal accounts, be similarly be
applied to overall domestic wealth.
In contemplating the use of accounting packages specifically designed
for business situations, to support home accounting, the author has so
far found that they are mostly, so (understandably) inherently bound up with
business accounts, reports and processes (e.g. purchases, sales,
invoicing, stock, payroll etc.) to make their adaptation for home use
virtually impossible.
The author used Microsoft Money© (MSM) as a general-purpose
accounting software package, from its earliest versions, in the development
of his new Domestic Accounting model.
Accordingly, all the examples and prototypes discussed in the book and
provided on the bonus CD are based on the use of MSM, together with a
general-purpose spreadsheet program.
The author does not specifically endorse the use of MSM and believes
that any general-purpose accounting package should be capable of being
used for DWBA.
For those already familiar with MSM, learning to use Domestic Well-Being
Accounting (DWBA) should be very straightforward; requiring just an
understanding of double-entry for which MSM is not usually used; and the
specifics of the new focus on Domestic Well-Being and its associated
structure, reports, ratios and graphics.
Click
here to learn more about Microsoft Money products and versions.
Most recently in February 2008, the author learnt of a software package
called Personal Accountz
®
which uses the double entry approach and the nominal accounts method of
handling financial changes. After establishing a set of accounts in this package with the
identical years' worth of accounts used as the sample accounts in 'Accounting for a Better
Life', the visibility was found to be fantastic. The Balance Sheet with the latest changes
and the Domestic Wealth was always as up-to-date as the last transaction entered!
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