II. Understanding of accounts

II. Understanding of accounts

Whooing is a personal household account book using an accounting methodology called double entry bookkeeping. Even if you don't know double-entry bookkeeping, you can do it on your own, but understanding this concept makes it much easier to use. If you already know doubles bookkeeping III. Go directly to the setting of the item.

Account definition

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Account flow chart

Doubles bookkeeping is a way to record the flow and status of money. For the sake of recording, we divide the attributes of money into five categories. This distinct attribute is called an account, and doubles bookkeeping is to manage the status and flow through this account.

수익
자산
부채
자본
(순자산)
비용

Account Description
Assets All the money I can spend
Debt money I owe
Capital money I can use minus the money I have to pay
Revenue Money that flows from the outside and increases my money
Cost Money that goes out and reduces my money

Please refer to Life consumption> Accounting 1> Assets for detailed account information.

assets/liabilities/capital

From now on, let's take a look at each account in earnest. First of all, let's look at the assets, liabilities, and equity that represent my current state.

asset account

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자산
부채
자본
(순자산)
비용

Assets are the sum of all the money available to you. It is used a lot in this sense on a daily basis, so it will not be very strange. It is an asset if you mobilize everything that can be converted into money other than real money, such as the balance in your bankbook, real estate or jeon tax, monthly rent, car, motorcycle, laptop, etc.

It's a bit different, but... Then are health, ability, and youth an asset? I think it can be viewed as an asset. Although it is slightly different from general household management, these can also be managed by quantifying them as assets in terms of self-development. Conversely, if nobody needs to manage real estate, which is an asset, it can be excluded from an asset. In other words, it is up to the user's individual judgment to the extent to which it is taken as an asset.

Assets increase or decrease due to several factors. Usually, when you get a loan (increase in debt) or when you get paid (income), your assets increase. Conversely, paying off a loan or buying something (incurring costs) reduces your assets.

Debt account

수익
자산
부채
자본
(순자산)
비용

*Debts are debts that must be paid off someday. It's a share you have to pay someday. In fact, whether you have money on hand or not, your debts remain there until they are paid off or forgiven. So, if you don't manage it properly with tools like whooing, you become a scary being.

Let's look at the relationship between debt and assets through loans. If you receive a loan of 1 million won, you have 1 million won in debt, and at the same time, 1 million won goes into your bankbook, so your assets also increase by 1 million won. We usually take loans to ensure that we know the debts we will have to pay off at some point in time, yet we have assets that can be flexible right now. And it is assumed that 300,000 won was spent on this asset. Then, the assets have been reduced to 700,000 won, and the loan debt is still 1 million won. If one day you earn more money and repay 1 million won, you have to give the bank 1 million won in the bankbook, so the bankbook itself will give you 1 million won and your debt will be 0. The order is as follows.

Situation Assets Liabilities
1. Received a loan of 1 million won 1 million won 1 million won
2. Expense 300,000 won 700,000 won 1 million won
3. Earned 2 million won 2.7 million won 1 million won
4. Repay the loan of 1 million won 1.7 million won 0 million won

From this example we can realize one thing. Liabilities can increase your assets, creating temporary financial space. However, it doesn't decrease forever until it is explicitly repaid (perhaps it actually goes beyond not giving and increases interest as it accrues). That is why it is not enough to manage and manage debt.

Debt isn't necessarily negative. It can be positive if the purpose of increasing debt is clear and if you are aware of and manage the risk. In fact, it is useful for companies to look at indicators such as the ratio of debt to equity.

Capital account

수익
자산
부채
자본
(순자산)
비용

Capital is my pure money minus the portion I owed. If I have 1 million won, of which debt is 200,000 won, my capital is 800,000 won.

Net assets or equity are the same terms. In whooing, I prefer the term capital because it is easier to unify with two letters.

For doubles bookkeeping, you must select an account that causes and results in each transaction. In other words, one day, when I looked at my bankbook, I tried to increase 50,000 won because I had 50,000 won more than the record, but it is difficult to increase 50,000 won by myself. In this case, you can select the capital item. Please refer to https://whooing.com/zAe for more information on this.

cost/revenue

Cost and revenue are common words in everyday use. You can also express it as expenses and income.

Expenses account

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자본
(순자산)
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Cost refers to the outgoing money that reduces my assets. Whatever you buy, enjoy, or make a purchase, this is a cost.

It's like an axis of evil that usually has to be controlled and reduced costs in household account books, but in fact, costs are not just bad guys because they contribute to improving the quality of life. Like the saying,'I want to live far away and make money', all of my assets have to be used in the end to meet my happiness.

What we need to care about is not that we don't just use it, but rather manage it so that we can feel the greatest happiness at a minimum cost.

Revenue account

수익
자산
부채
자본
(순자산)
비용

*Revenue is money coming in from the outside, which increases my assets as opposed to cost. If you earn a salary or generate sales through your business, this is a profit.

In fact, to be precise, profit does not just come in, it is a result of my time, ability, investment cost, etc., but anyway, if it is converted into money through added value, it is profit.

Net income account

Net profit or loss is the amount earned within a specified period minus expenses. Of course, the bigger the better, the better, and the minus means that you spend more money than you earned within the period. This is a conceptual figure, so no separate item setting is required.

External data useful for understanding

On this page, we have explained as much as you can use doubles bookkeeping. However, if you are still unsure of what doubles bookkeeping is or you want to know more in detail, the following data will be of great help. Some materials go beyond account descriptions to deal with transaction entry. Journal entries in accounting are much more difficult than entering transactions in whooing, so it doesn't matter if you don't understand that part.

-Video: Daily consumption> Accounting 1> Assets -Video: Household consumption> Accounting 1> Liabilities and capital -Video: Living Consumption> Accounting 1> Revenue and Expenses

-Text: Economic Briefing 1: Basics of Accounting-Double Entry Bookkeeping, Statement of Financial Position, Income Statement -Text: Economic Briefing 2: Money and No Money -Text: Economic Briefing 3: The Meaning of Debt -Text: Economic Briefing 4: What is Capital on Top-Money in

-Webtoon: Misaeng part2-16th Wednesday -Webtoon: Misaeng part2-Number 43 -Webtoon: Misaeng part2-No. 44

-Video: Accountant Taking Photos> Lecture: Debit and Credit? Understanding Double Entry Bookkeeping -Video: Everything about self-employment> Principles of accounting / Basic accounting for understanding doubles books