Plain Text Accounting FAQ

See also the Cookbook, Docs, and app-specific FAQs. If you don't see what you need, ask for it in the chat, or add it yourself.

What's Plain Text Accounting ?

See What is Plain Text Accounting ?

Which PTA app should I choose ?

Here are some old and outdated comparisons Check out the projects' stats, and perhaps their chat rooms / mail lists. Developer opinions are hard to find, but here are a few:

SM on why hledger over Ledger (2019):

SM (2022): We all have opinions - ask for them in chat or search the reddit / mail lists / web. Circa 2022 I hope it's fair to say, without my bias showing:

SM on new user experience (2023):

How should I organise files ?

See Organising files.

How big do journal files get ?

For individual accounting, somewhere between 500-1500 transactions and 100-400 Kb of journal file per year seems typical.

How should I choose account names ?

See below and Choosing accounts.

What are the three top level accounts ?

In english, they are Assets (things you own), Liabilities (things you owe), Equity (your/owners' investment or stake or "overall wealth").

What are the five top level accounts ?

In practice, two more top level accounts are used, making five. In english: Assets, Liabilities, Equity, Revenues (or Income), Expenses. Sometimes abbreviated to single letters; hledger uses A, L, E, R, X.

Revenues and Expenses are essentially inflows and outflows during some period; technically they are changes in Equity, reported separately for clarity. Businesses usually merge Revenues and Expenses into their Equity balance at the end of each accounting period.

What is the accounting equation ?

A simple formula that always holds true when bookkeeping is correct. You'll see it written in different ways, eg:

You can check the accounting equation for your accounts by inspecting an ALE balance report like hledger bse. (In practice a balanced accounting equation isn't essential for personal accounting, and most people don't check it.)

What are balanced transactions ?

A transaction where the sum of inflows is equal to the sum of outflows (or with the signed number convention described below: where all of the posted amounts sum to zero), confirming that no money appeared or disappeared.

PTA apps and other double-entry bookkeeping software enforce balanced transactions to help prevent errors (sometimes with exceptions for special circumstances).

Note, balanced transactions does not imply a balanced accounting equation. Both of these can help detect errors, but balanced transactions is a higher priority.

In english, should I call it Revenue or Income ?

"Revenue" is more often used in business, and more precise; it implies "gross income", ie total proceeds before taxes and certain costs, whereas "Income" implies "net income", ie profit after taxes and costs. Eg the report showing profit is called "Income Statement" in the US.

"Income" is very commonly used in personal finance and more familiar to non-accountants.

So, use the one you prefer.

What is Equity really ?

Equity is more abstract than the other top level accounts, can be described in different ways, and takes a bit longer to feel intuitive. It is best understood with repeated exposure. Two useful rules of thumb:

When multiple owners/investors have contributed funding to set up a business, each of them owns a portion of the business, which is tracked as equity. And if the business is dissolved, they would each have their share returned to them (ideally).

In personal accounting, your finances are "the business" and you are the only investor. When you start tracking your finances, whatever wealth you have accumulated up to this point is your initial "contribution to the business", ie your equity, which funds your starting balances. Practically speaking, in personal accounting you'll never use equity except

Where are debits and credits ?

Many plain text accounting tools use signed numbers in place of the traditional terms debit and credit.

Of course the debits and credits are still there. But with this convention, when you see a positive amount being posted in an account, it is a debit (inflow), and when you see a negative amount posted, it is a credit (outflow).

(Or possibly a contra-credit or contra-debit respectively. "Contra" means "opposite to the normal direction".)

(Be warned of the usual pitfall that banks and businesses use "debit" and "credit" from their point of view, ie reversed, when communicating with customers.)

Here's a mnemonic, if you need one:

          debit | credit
             to | from  
             in | out   
           plus | minus 
           left | right 
    short words | longer words

Newcomers to accounting find signed numbers much more intuitive and easier to learn than debit/credit terminology, partly because they have less historical and didactic baggage. (Some experienced accountants find otherwise.)

Why do some balances look negative ?

Because of the signed number convention, many PTA apps and examples show Equity, Liability, and Revenue account balances as negative numbers. You can get used to reading these signed-number reports in a day or two. Just remember: when equity increases (more wealth!) or liability increases (more debt!) or revenue increases (more income!), their balance is shown as a larger negative number (more negative).

Some PTA tools allow flipping the minus signs, or showing debits and credits instead of signed numbers.

Should I categorise with account, payee, description, tags... ?

Accounts are the most standard, best supported mechanism, so typically you should use them for most categorising. But it depends on the level of detail you need, your data entry process, your PTA app, and your preferences. Eg:


Which account type are loans ?

If you are the lender, in your ledger it's an asset. Eg assets:loans:PERSON or assets:receivable:BORROWER.

If you are the borrower, in your ledger it's a liability. Eg liabilities:debts:PERSON or liabilities:payable:LENDER.

If the loan is terminated without being fully repaid, eg by being forgiven, in your ledger the remaining amount becomes an expense (if you were the lender) or revenue (if you were the borrower).

Which account type are pre-paid commuter passes, credits at a business, etc ?

If you would like to track them in detail, record them as pre-paid assets. Eg assets:prepaid:rail-card or assets:prepaid:yoga-studio. You can record them either in your base currency, or with a dedicated commodity symbol, like CLASSES. As you use them, transfer/convert them to expenses.

If you don't need such detail you can record their full amount as an expense on the purchase date, and not track them further.

How to track savings goals ?

Some ways people have tried:


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