Accounting or bookkeeping may look like black magic to nonprofessionals, but its most basic forms are less obscure than you might think. A good accounting system can save money, trouble, and time – even if you are just trying to get your personal finances under control. In this tutorial, I will explain a simple accounting technique, plain text accounting (PTA), and introduce you to hledger, one of the most popular open source PTA tools.

What Is PTA?

In double-entry accounting, every change in the state of the system is a dated movement of money (or whatever else is being accounted for) between at least one source and one destination, and the sum of all those movements equals zero. Double-entry accounting has been around for centuries because its "balanced" transactions are a great, self-enforcing, easy-to-code way to guarantee that no money ever enters or leaves the system unexplained. In double-entry accounting, money is usually inside three main types of accounts: assets (what you own), liabilities (what you owe), and equity, plus two other categories devoted to revenues and expenses. Each account can be subdivided in multiple levels of sub-accounts according to your needs.

In business, equity, more or less, is defined as every stakeholder's initial contributions to the company, from money to office space to machinery, and what the stakeholder could potentially get back upon leaving the company or the company shutting down. In personal accounting, equity represents whatever "wealth" you have when you start accounting that doesn't belong in the other four top-level categories (assets, liabilities, revenues, and expenses). In practice, as far as personal accounting for most people is concerned, equity could be little more than an initial configuration parameter that must be defined somehow, but has little or no impact on what happens next.

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