The Only Accounting You Need to Know to Build a Ledger
5 use cases, 6 operations, and why your accounting course skipped the parts that matter to you.
What do you do when you’re tasked with building a ledger? You sign up for an accounting course online.
That makes all the sense in paper: ledgers are financial systems, governed by accounting rules. Go learn your debits and credits, depreciations and equities, balance sheets and P&L statements, and you’ll be ready to build.
Except that none of that will help you.
The reason is that accounting, as it’s usually taught, is universally aimed at accountants and financial analysts. And that means, to put it very simply, that accounting courses are taught so that you learn how to prepare financial statements. Yes, there’s way more to it, but the central point is either to learn to write them (for accountants that do their clients’ taxes) or to read them (for analysts that track the value of companies).
And that’s not the accounting you need to build a ledger.
Every ledger system out there is built to support one of 5 use cases:
Wallets
Marketplaces
Loyalty programs
Lending
Insurance
The thing is, I own a copy of Accounting Information Systems, by Romney, Steinbart, Summers and Wood (16th edition!). It’s the book I bought when I realized that I had to fix a single-entry ledger that was losing track of users’ money
And although it’s the book ChatGPT would recommend you if you want to build financial systems, none of these use cases are covered in that book.
All case studies and lessons in that book are for accounting systems that need to keep their own organization’s finances, not for technology companies offering, or using, financial services for themselves or their users.
Sure, if you’re working at a company selling appliances and consumer electronics, the AIS book is what you need.
But if you move your users’ money around, you’ve bought the wrong book.
I’m Alvaro Duran, and this is The Payments Engineer Playbook. In today’s article, we’re going to cover, one by one, all the actual ledger use cases, and the accounting needed to handle them correctly:
How they work
The operations needed
A quick real-world company that operates under that use case
Enough intro, let’s dive in.
