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Comment by mumblemumble | Hacker News Reader

One thing I really appreciate about YNAB is that they ditched the obscure words with murky Latin roots and rules to memorize about flipping signs and whatnot, and just used the words "inflow" and "outflow". They don't mean anything different in this context than "debit" and "credit." But still, somehow, when you use the traditional words, the topic seems to be as difficult to explain as monads, while with the YNAB terms it ends up being obvious and intuitive.

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The problem with "debit" and "credit" is that everyone learned the words backwards, thanks to the banking industry's terrible UX. "Your" debit and credit accounts are actually the bank's accounts for their relationship with you.

So when you start being your own enterprise, you have to unlearn the two most fundamental words you know.

This is the right model, and the easiest way to explain it. It's all stocks and flows. A balance is a stock, a transaction is a flow. A flow has to happen between two stocks, and the sign in each side is opposite so it adds to zero

...but sometimes things aren't inflows or outflows. Depreciation is neither, yet it's (almost) fundamental to accounting.

Depreciation is also neither a credit nor a debit.

Doesn't one normally handle depreciation by creating an expense account called "depreciation", and recording the depreciation as a debit in the asset account and a credit in the depreciation account?

And couldn't one just as easily word that as, "We track the depreciation by creating an account for it, and recording a flow of money into it from the asset's account?"

Yes, but the other way around: you debit the "Depreciation" expense account (since it is the sink, it increases) and credit the asset account (it is the source, it decreases).

I rest my case.

You often end up with three accounts. Asset (balance sheet), accumulated depreciation (balance sheet), and the depreciation expense account (P&L).

In which case the depreciation is cr. acc. depreciation and dr. depreciation expense.

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