I'll try to answer some of your questions, but I'm not an accountant.
1. You're trying to understand the money coming in and going out of a business. The organization of this information can make certain events more apparent, like whether you're actually making or losing money (this is not necessarily obvious!) how much 'runway' a company has, roughly how valuable it is (a bit nebulous because a lot more goes into it, but "doing accounting" is the starting point), whether inventory is being stolen more than might be normal, etc.
2. No idea about this guide or the coloring. TBH a spreadsheet conveys the data better than a graph. Double entry bookkeeping was a revolutionary idea though. I think it's fairly easy to forget the full effect of a transaction. I buy a $500 chair for my business, this isn't just $500 less in cash, it's $500 more in some 'furniture' asset. This accounting for every minute detail of what your business owns or owes across even dozens of transactions becomes difficult to track.
1. Look up cash vs. accrual accounting. I think I learned most of this on Khan Academy the first time, but there must be dozens of YouTube videos on it. Basically w/ accounting over time you start adding deferred accounts of different sorts like payables and receivables.
2. No idea. I think when you start getting into these topics there is either just some software solution that follows some standard or allows you to make a choice about how to use the exchange rate, or there is some specific standard set by FASB saying how to do it. But I don't know.
As a simple example of something else, with inventory, businesses can value it a few different ways including FIFO and LIFO (where they value inventory based on the price they paid least or most recently) among others. These choices are often just a preference for the business, or perhaps common for a business' industry. I suspect there might be similar methods of valuation for accounts denominated in different currency, where you could take the amount by exchange rate either on the first or last of the month or by its average rate over the month.
I appreciate the help, but I think the goal of understanding the money coming in and going out is too abstract - what does it mean to understand, and at what level is understanding achieved?
The point I want to make is that all the things described in the article should be described in terms of their relation to the problems being solved. Because the article failed to establish this connection you can say "a spreadsheet conveys the data better than a graph", or vice versa, and there's no way to decide whether that's true or not.
For instance, being able to answer the following questions:
- Do I have enough money to continue operating?
- Are there any unexpected losses?
- If there are unexpected losses, where are they?
- Are there unexpected gains? And where are they?
- If I want to spend more, how much can I safely spend?
- How are accounts likely to change in the future, and can the above questions be answered then?
Maybe there are others. Questions an exec, or a spouse, or the tax office might ask. The goal needs to have that level of specificity. When an accountant "balances the books" it's not an arbitrary exercise, it's trying to answer one of those questions above.
For the record, I absolutely want an accounting for computer scientists guide. I'm not exactly interested in wrestling with and mapping the concepts myself, at least with the free time I have right now.
1. You're trying to understand the money coming in and going out of a business. The organization of this information can make certain events more apparent, like whether you're actually making or losing money (this is not necessarily obvious!) how much 'runway' a company has, roughly how valuable it is (a bit nebulous because a lot more goes into it, but "doing accounting" is the starting point), whether inventory is being stolen more than might be normal, etc.
2. No idea about this guide or the coloring. TBH a spreadsheet conveys the data better than a graph. Double entry bookkeeping was a revolutionary idea though. I think it's fairly easy to forget the full effect of a transaction. I buy a $500 chair for my business, this isn't just $500 less in cash, it's $500 more in some 'furniture' asset. This accounting for every minute detail of what your business owns or owes across even dozens of transactions becomes difficult to track.
1. Look up cash vs. accrual accounting. I think I learned most of this on Khan Academy the first time, but there must be dozens of YouTube videos on it. Basically w/ accounting over time you start adding deferred accounts of different sorts like payables and receivables.
2. No idea. I think when you start getting into these topics there is either just some software solution that follows some standard or allows you to make a choice about how to use the exchange rate, or there is some specific standard set by FASB saying how to do it. But I don't know.
As a simple example of something else, with inventory, businesses can value it a few different ways including FIFO and LIFO (where they value inventory based on the price they paid least or most recently) among others. These choices are often just a preference for the business, or perhaps common for a business' industry. I suspect there might be similar methods of valuation for accounts denominated in different currency, where you could take the amount by exchange rate either on the first or last of the month or by its average rate over the month.