#DEBIT CREDIT ACCOUNTING CHART HOW TO#
#DEBIT CREDIT ACCOUNTING CHART SERIES#

This account’s balance will increase every time we pay off card processing fees. To track card fees, we will be using a debit normal account. Notice that we need one account for each customer that creates an account with us. Therefore, they should be credit normal accounts. Those funds are technically now available for our ‘use’ - and as such, they are sources of funds. Because users should be able to withdraw them at any time, they are funds we ‘owe’-or liabilities. The user balance accounts represent funds we are holding on behalf of our users.

#DEBIT CREDIT ACCOUNTING CHART SERIES#

For more information on debit and credit normal accounts, refer to the “Dual Aspect” section of Part I of this series here. Because it represents an asset or use of funds, we will treat it as a debit normal account. Our Venmo Clone's Sample Chart of AccountsĪ cash account represents the amount of money we are holding in our bank account in cash.

The COA is a simple depiction of the accounts we will need, their type, and normality: With these requirements in mind, let’s map our chart of accounts (COA). Each deposit will need to account for a 3% card transaction processing fee paid by us.We want to properly calculate and collect revenue from fees.We want to ensure cash in hand in our bank account is always equal to the total users deposited in the app.We want to discern between the account balances for each user and expose them to said users consistently.Users will pay a small fee when they make a withdrawal from the app, to be deducted from their wallet balance.Users can withdraw their balance into a bank account via ACH or a debit card.Users can send money to each other in the app.Users can add to their balance by way of card payments.Each user will have an account balance, exposed via the app.Let’s start with the product requirements of our Venmo clone, first from the user’s perspective: The aggregate balance of credit normal accounts and debit normal accounts should net out to zero (credits = debits).īuilding a Venmo clone Step 1: Reviewing the use case.Each transaction needs to have at least two entries, which, in aggregate, must affect credit and debit sides in equal amounts. Transactions should enforce double-entry upon creation.Accounts should be classified as debit or credit normal.It should be composed of accounts and transactions:.To recap, for a system to gain the consistency benefits that accounting provides:

#DEBIT CREDIT ACCOUNTING CHART HOW TO#

If you’re curious about the API calls and system design considerations of designing a digital wallet app, you can also check out our previous journal on how to build a digital wallet. We hope to publish guides about more complex use cases (lending, insurance, etc.) in the future.

Throughout, we will show how to apply the double-entry accounting principles we covered in Part I. In this tutorial, we will be designing the ledger for a Venmo clone-a simple digital wallet app. Before diving into this post, you may want to read Part I here. Welcome back to our Accounting for Developers series.

Debit credit accounting chart