Double Entry Accounting for Rails Applications
- add
gem 'debitcredit'to yourGemfile - and run
bundle install - run
rake debitcredit:install:migrations db:migrate
- and run
bundle update debitcredit - run
rake debitcredit:install:migrations db:migrate
Transactions were renamed to entries. You need to rename:
- Transaction to Entry
- transactions to entries
- has_transactions to has_entries
http://en.wikipedia.org/wiki/Debits_and_credits
In Double Entry Accounting there are 5 account types: Asset, Liability, Income, Expense and Equity defined as follows:
Asset accounts are economic resources which benefit the business/entity and will continue to do so. e.g. cash, bank, inventory, buildings, etc.
Liability accounts record debts or future obligations the business/entity owes to others.
Equity accounts record the claims of the owners of the business/entity to the assets of that business/entity. e.g. capital, retained earnings, drawings, common stock, accumulated funds, etc.
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
Income accounts record all increases in Equity other than that contributed by the owner/s of the business/entity. e.g. services rendered, sales, interest income, membership fees, rent income, etc.
Expense accounts record all decreases in the owners' equity which occur from using the assets or increasing liabilities in delivering goods or services to a customer - the costs of doing business. e.g. telephone, electricity, salaries, depreciation, rent etc.
Debit and credit affect balance of an account differently depending on the account type.
For Asset and Expense accounts, Debit increases the balance, and credit decreases it. For the rest of the accounts it is the opposite. i.e. debit decreases and credit increases the balance.
In each transaction sources are credited and destinations are debited.
I repeat: credit is the source and debit is the destination.
Personally, I was surprised to learn that. From my dealings with the bank I expectred 'credit' to be the destination, becase each time my bank account is 'credited' I have more money in it.
The explanation for this is simple, your bank sees your account not as an 'asset', but as a 'liability', becase the balance on it is how much bank ows you. That's why crediting this account increases it's balance.
At any given point accounts should satisfy the following equation:
Assets + Expenses = Liabilities + Equity + Income
You can verify it with Account.balanced?.
Debitcredit takes care to keep the system balanced at all times, if you get an unbalanced state, its a bug, please report immediately!
The 5 types of accounts are represented by Debitcredit::AssetAccount,
Debitcredit::LiabilityAccount, Debitcredit::IncomeAccount, Debitcredit::ExpenseAccount and Debitcredit::EquityAccount
You can create standalone accounts:
Debitcredit::AssetAccount.create name: 'asset'
puts Debitcredit::Account[:asset].name
Or you can have a reference for the account:
Debitcredit::AssetAccount.create name: 'asset', reference: User.first
Or
class User
has_many :accounts, as: :reference, class_name: 'Debitcredit::Account'
...
end
User.first.accounts.asset.create name: 'bank'
puts User.first.accounts[:bank].name
Or better yet:
class User
include Debitcredit::Extension
has_accounts
end
By default accounts are prevented from having a negative balance, but you can
pass overdraft_enabled: false to allow it:
Debitcredit::AssetAccount.create ..., overdraft_enabled: true
You can pass a block to has_accounts and to define referenced accounts:
class User
include Debitcredit::Extension
has_accounts do
income :salary
expense :rent
asset :checking, true # allow negative balance
end
end
User.first.accounts.salary # will be created on first use
You can prepare entries using DSL:
t = Entry.prepare(description: 'rent payment') do
debit expense_account, 100, "you can also provide a comment"
credit bank_account, 50
credit creditcard, 50
end
t.save!
Sum of the debits must be equal to the sum of the credits. Amounts can not be negative.
You can create entries with a reference. For this case, and in case that reference has 'accounts' association, you can use account names instead of objects:
class User
include Debitcredit::Extension
has_accounts
has_entries do
def pay!
...
end
end
end
t = user1.entries.prepare(description: 'sale') do
debit :checking, 100 # will use user1.accounts[:checking]
credit user2.accounts[:checking], 100
end
You can prepare an inverse entry. For example if you want to rollback an existing entry:
rollback = existing.inverse(kind: 'refund', description: 'item is out of stock') rollback.save!
If an account doesn't allow overdraft (which is the default), no transaction will be allowed to decrease the blance if result is negative. The 'decrease' part is important, so that it's still ok to have a transaction that increases the balance which was negative.
By default inverse entries are allowed to take accounts into overdraft even for
accounts with overdraft_enabled: false. if this is undesirable, pass
ignore_overdraft: false to the inverse call.
- Fork it
- Create your feature branch (
git checkout -b my-new-feature) - Commit your changes (
git commit -am 'Add some feature') - Push to the branch (
git push origin my-new-feature) - Create new Pull Request
This project rocks and uses MIT-LICENSE.