Domestic Well- Being Accounting

 

Implementation Issues









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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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