Boris was talking at Rails Israel 2015 conference about accounting and bookkeeping principles for software engineers. The presentation covers the suggested implementation and explanation of using astrails' gem debit-credit.

1. Accounting For Hackers
Boris Nadion
boris@astrails.com
@borisnadion

2. @borisnadion
boris@astrails.com

3. astrails
http://astrails.com

4. awesome web and mobile apps
since 2005

5. 100+

6. marketplaces

7. money

8. money

10. valuable psychological benefits

11. cash

12. virtual representation

13. model

14. marketplace

15. seller / buyer / app

16. $100
buyer
$90
$10
seller
app

17. $100
buyer
$90
$10
seller
app
$90
seller
pay-in
pay-out

18. touch / don’t touch

19. don’t touch

20. $100 $90
$10
$100 $100 $10
buyer
seller
buyer seller
app
app
$100 $100 $90
buyer app seller

21. touch

22. naïve implementation

23. class Purchase < ActiveRecord::Base
belongs_to :product
belongs_to :buyer, class_name: "User"
belongs_to :seller
validates :amount, :app_fee, presence: true
scope :paid, -> { where(state: "paid") }
scope :withdrawn, -> { where(state: "withdrawn") }
before_validation :set_app_fee, on: :create
def set_app_fee
return unless amount
self.app_fee = amount * APP_FEE_PERCENT
end
end

24. Purchase.paid.calculate(:sum, :amount)
Purchase.withdrawn.calculate(:sum, :amount)
seller = Seller.first
# total per seller
seller.purchases.calculate(:sum, :amount)
# pending payout
seller.purchases.paid.calculate(:sum, :amount)
# paid-out
seller.purchases.withdrawn.calculate(:sum, :amount)

25. By Hayley Bouchard https://www.flickr.com/photos/questa/5812984945
we are cool!

26. $100
buyer
$12
$10
seller 1
app
$31
seller 2
…

27. $100
buyer
$12
$10
seller 1
app
$31
seller 2
…
$12
seller 1
$31
seller 2
…
escrow

28. escrow

29. clearance

30. class Purchase < ActiveRecord::Base
# ...
scope :cleared, -> { where(state: "cleared") }
# ...
def self.clearance_cron!
# ...
end
end
seller.purchases.cleared.calculate(:sum, :amount)

31. solution?

32. double entry bookkeeping

33. https://en.wikipedia.org/wiki/File:Luca_Pacioli_(Gemaelde).jpeg
Luca Pacioli
1447–1517

34. accounts

35. transactions

36. ledger

37. debit / credit

38. traditional
aka British - we won’t cover it

39. accounting equation
aka American

40. asset (A)
cash, bank, accounts receivable, inventory

41. liability (L)
accounts payable, salaries, customer deposits, etc

42. equity (Eq)
capital, retained earnings, accumulated funds, etc

43. income / revenue (I)
services rendered, sales, membership fees, etc

44. expense (Ex)
telephone, water, electricity, repairs, salaries, etc

45. A + Ex = Eq + L + I

46. asset, liability, income, expense

47. debit credit
asset
+ -
equity
- +
liability
- +
income/revenue
- +
expense
+ -

48. account
type
account name debit credit
asset PayPal $100 +
liability Seller Withdrawable $90 +
income/
revenue
Application Fee $10 +
Purchase Transaction

49. balance sheet

50. accounts type description balance
asset PayPal $100
liability All Sellers Withdrawable $90
income/revenue Profit $10
Balance Sheet
A + Ex = Eq + L + I
A($100) = L($90) + I($10)

51. accounts type description balance
asset PayPal $100
asset Stripe $200
liability All Sellers Withdrawable $270
income/revenue Profit $30
Balance Sheet

52. payout

53. account
type
account name debit credit
liability Seller Withdrawable $90 -
asset PayPal $90 -
Payout

54. accounts type description balance
asset PayPal $10
liability All Sellers Withdrawable $0
income/revenue Profit $10
Balance Sheet
A($10) = I($10)

55. A + Ex = Eq + L + I

56. sophisticated example

57. keep talking…
I’m
diagnosing you

58. $100
buyer
$30
$10
seller 1
app
$60
seller 2

59. account
type
account name debit credit
income Sales $100 +
asset PayPal $100 +
liability Seller 1 Escrow $30 +
liability Seller 2 Escrow $60 +
expense Seller Expenses $90 +
Purchase Transaction

60. account type account name amount
income Sales $100
asset PayPal $100
liability Sellers Escrow $90
expense Seller Expenses $90
Balance Sheet
A($100) + Ex($90) = L($90) + I($100)

61. account type account name debit credit
liability Seller 1 Escrow $30 -
liability Seller 2 Escrow $60 -
liability Seller 1 Withdrawable $30 +
liability Seller 2 Withdrawable $60 +
Clearance
A($100) + Ex($90) = L($90) + I($100)

62. account type account name debit credit
liability Seller 1 Withdrawable $30 -
asset PayPal $30 -
Payout
account type account name debit credit
liability Seller 2 Withdrawable $60 -
asset PayPal $60 -

63. account type account name amount
income Sales $100
asset PayPal $10
liability Sellers Escrow $0
expense Seller Expenses $90
Balance Sheet
A($10) + Ex($90) = I($100)

64. debit credit
Revenues (Sales) $100
Expenses (Paid to Sellers / Suppliers) $90
Net Income $10
Income Statement

65. implementation

66. https://github.com/astrails/debitcredit
double entry accounting for rails applications

67. Debitcredit::AssetAccount.create name: 'paypal'
puts Debitcredit::Account[:paypal].name

68. class Seller < ActiveRecord::Base
include Debitcredit::Extension
has_accounts do
liability :escrow
liability :withdrawable
end
has_entries
end

69. class Payout < ActiveRecord::Base
belongs_to :seller
after_create :payout!
validates :amount, presence: true
# ...
def payout!
Payout.transaction do
self.payout_entry = Entry.prepare(description: "John the Seller") do
kind "withdrawal"
debit seller.accounts[:withdrawable], amount
credit Debitcredit::Account[:paypal], amount, "seller payout"
end
payout_entry.save!
self.state = "paid"
self.paid_at = Time.now.utc
save!
end
end
end

70. ledger

71. cached values

72. class Order < ActiveRecord::Base; end
class OrderItem < ActiveRecord::Base; end
class Purchase < ActiveRecord::Base; end
class Withdrawal < ActiveRecord::Base; end
class Refund < ActiveRecord::Base; end
class Chargeback < ActiveRecord::Base; end

73. recovery

74. why

75. transparency

76. balance sheet
and income statement

77. preventing bugs & fraud
accounting equation

78. A + Ex = Eq + L + I

79. thanks!
Boris Nadion
http://astrails.com