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The Accounting Game

There's a book that introduces accounting called The Accounting Game by Mullis and Orloff:

enter image description here

ledger-cli file

Here's one approach to implementing the transactions from chapter 1 in ledger-cli:

2024/01/01   original investment
    assets:cash  5
    liabilities:owners equity:original investment

2024/01/02   loan from parents
    assets:cash  10
    liabilities:notes payable


2024/01/03   buy materials
    assets:inventory  12
    assets:cash


2024/01/04   sales
    assets:cash  25
    assets:inventory  -10
    liabilities:owners equity:earnings week to date


2024/01/05   expenses
    assets:cash  -5
    liabilities:owners equity:earnings week to date


2024/01/05   pay off loan
    liabilities:notes payable  10
    assets:cash

Chapter 1 balance sheet

At the end of chapter 1, here's the balance sheet we end up with:

enter image description here

If we run ledger on the file, we get:

$ ledger -f lemonade.ledger balance
                  15  assets
                  13    cash
                   2    inventory
                 -15  liabilities:owners equity
                 -10    earnings week to date
                  -5    original investment
--------------------
                   0

Which appears to match up with the book's balance sheet.

Question : expenses

At one point in the chapter, some expenses are tracked:

enter image description here

I implemented this transaction as follows:

2024/01/05   expenses
    assets:cash  -5
    liabilities:owners equity:earnings week to date

While this does result in a balanced sheet, the actual expenses (glass rental, advertising, rent) aren't reflected in the balance sheet or in the ledger file.

What's a good way to track this in the ledger file and still end up with a balanced sheet?

Update 1

In a comment below, Hart CO mentions that chapter 2 discusses the income statement. Here's the income statement from chapter 2:

enter image description here

And the ending balance sheet:

enter image description here

Here's a ledger file that incorporates the expenses:

2024/01/01   original investment
    assets:cash  5
    liabilities:owners equity:original investment

2024/01/02   loan from parents
    assets:cash  10
    liabilities:notes payable


2024/01/03   buy materials
    assets:inventory:lemons  10
    assets:inventory:sugar  2
    assets:cash


2024/01/04   sales
    assets:cash  25
    assets:inventory  -10
    liabilities:owners equity:earnings week to date


2024/01/05   expenses
    expenses:glass rental  2
    expenses:advertising  1
    expenses:rent  2
    assets:cash


2024/01/06   pay off loan
    liabilities:notes payable  10
    assets:cash

I get $15 in the assets, which is correct. However, I'm getting -20 for liabilities:

$ ledger -f lemonade-income-statement.ledger balance
                  15  assets
                  13    cash
                   2    inventory
                  10      lemons
                   2      sugar
                   5  expenses
                   1    advertising
                   2    glass rental
                   2    rent
                 -20  liabilities:owners equity
                 -15    earnings week to date
                  -5    original investment
--------------------
                   0
Simon Michael
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dharmatech
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1 Answers1

0

Here's one approach which incorporates expenses:

2020-01-01 initial investment
    assets:cash  5
    liabilities:owner equity:initial investment

2020-01-02 loan from parents
    assets:cash  10
    liabilities:notes payable:parents


2020-01-03 buy lemons
    lemons  10
    assets:cash


2020-01-03 buy sugar
    sugar  2
    assets:cash


2020-01-03 make lemonade
    assets:lemonade
    lemons  -10
    sugar    -2


2020-01-03 sell lemonade
    assets:cash       25
    assets:lemonade  -10
    liabilities:owner equity:profit


2020-01-04  pay for glass rental
    expenses:glass rental  2
    assets:cash


2020-01-05  pay for sign
    expenses:sign  1
    assets:cash


2020-01-06  pay rent
    expenses:rent  2
    assets:cash


2020-01-07  pay back loan
    liabilities:notes payable:parents  10
    assets:cash


2020-01-08  adjust profit for glass rental
    liabilities:owner equity:profit  2
    expenses:glass rental


2020-01-08  adjust profit for sign
    liabilities:owner equity:profit  1
    expenses:sign


2020-01-08  adjust profit for rent
    liabilities:owner equity:profit  2
    expenses:rent

Balance at the end:

$ ledger -f lemonade-003-tagged.dat b
                  15  assets
                  13    cash
                   2    lemonade
                 -15  liabilities:owner equity
                  -5    initial investment
                 -10    profit
--------------------
                   0

Note that I can also show balances before the expenses were taken out of profits, so we can see what they were at that point in time:

$ ledger -f lemonade-003-tagged.dat b --end 2020-01-07
                  25  assets
                  23    cash
                   2    lemonade
                   5  expenses
                   2    glass rental
                   2    rent
                   1    sign
                 -30  liabilities
                 -10    notes payable:parents
                 -20    owner equity
                  -5      initial investment
                 -15      profit
--------------------
                   0
dharmatech
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