Luca

Luca is a simple accounting engine that allows you to create and manage your accounts and transactions.

Based on the Double Entry Accounting System made by Luca Pacioli in the 15th century.

Usage

Architecture

Luca abstracts accounting into the following three concepts:

Accounts represent real accounting accounts (I know, I know, it's a bit of a stretch), they are hierarchical, meaning they can have child accounts that compose their parent account balance check The accounting equation section to understand how and whys.

Transactions represent the movement of money between accounts.

Entries represent rows in an account.

The Accounting Equation

Uses the Accounting Equation as the foundation of the engine.

Assets = Liabilities + Equity

This equation explains the relationship between the assets, liabilities and equity of a company and its divided into the following parts:

Assets = Liabilities + Equity

Equity = Capital Contributions + Retained Earnings

Retained Earnings = Opening Retained Earnings + Current Cycle Profit - Current Cycle Dividends

Current Cycle Profit = Current Cycle Revenue - Current Cycle Expenses

Making the Expanded Accounting Equation:

Assets = Liabilities + Capital Contributions + Opening Retained Earnings + Current Cycle Revenue - Current Cycle Expenses - Current Cycle Dividends

We can rearange the equation to extract basic account types and their normal sides:

Current Cycle Expenses + Current Cycle Dividends + Assets = Liabilities + Capital Contributions + Opening Retained Earnings + Current Cycle Revenue

This final equation explains how the left side of the equation is paied using the right side.

In a T account, the left side are DEBITS and the right side are CREDITS, making this equation arrangement match the T account structure.

Left side are DEBITS = Right side are CREDITS

Final and simplified equation

Expenses + Dividends + Assets = Liabilities + Capital Contributions + Earnings + Revenue

What this means for Luca?

Luca abstracts Accounts into a herarchical structure, where top accounts are composed of child accounts, and each child account has a normal side (DEBIT or CREDIT) that determines which side of the accounting equation the account belongs to (in a local scope).

An example of an account composed of 2 child accounts:

Current Cycle Earnings has 2 child accounts, Current Cycle Expenses (DEBIT) and Current Cycle Revenue (CREDIT), meaning that the balance of Current Cycle Earnings is calculated as Current Cycle Revenue (CREDIT) - Current Cycle Expenses (DEBIT), following the same rule as the accounting equation where the left side are DEBITS and the right side are CREDITS.

This same logic is applied to all accounts.