# Financial Concepts

This page explains the fundamental accounting concepts that EntryTarget implements.

## Double-Entry Bookkeeping

Double-entry bookkeeping is the foundation of modern accounting. Every financial transaction is recorded in at least two accounts: one account is debited and another is credited. The total debits must always equal the total credits across the entire system.

**Example:** A customer sends R$10.00 via PIX.

| Account                | Debit   | Credit  |
| ---------------------- | ------- | ------- |
| Customer Payment (BRL) | R$10.00 |         |
| PIX Asset (BRL)        |         | R$10.00 |

The customer's payment account balance decreases by R$10.00 (debit), and the PIX asset account balance increases by R$10.00 (credit).

### Why Double-Entry?

* **Self-balancing** — the sum of all account balances in the system is always zero
* **Auditability** — every movement of money is traceable to its counterpart
* **Error detection** — if debits don't equal credits, something is wrong

## Integer Amounts

All monetary values in EntryTarget are **integers**. You control the number of decimal places on your side.

| Real Amount    | Stored Value | Your Decimal Places |
| -------------- | ------------ | ------------------- |
| R$1.00         | `100`        | 2                   |
| $1.00          | `100`        | 2                   |
| BTC 0.00000001 | `1`          | 8                   |

This design eliminates floating-point rounding errors that plague financial systems.

## Debits and Credits

In EntryTarget:

* A **debit** operation **decreases** the account balance
* A **credit** operation **increases** the account balance

Each journal entry in a transaction specifies one debit account and one credit account. The amount is subtracted from the debit account and added to the credit account.

## Assets (Currencies)

An asset represents a currency or unit of value (e.g., `BRL`, `USD`, `EUR`, `BTC`). Every account has a single asset, and every journal entry declares its asset.

**Rule:** Both the debit account and the credit account of a journal entry must have the same asset as the entry's declared asset. This prevents accidental cross-currency movements within a single journal entry.

A single transaction can contain journal entries in different currencies — for example, one journal entry moving BRL and another moving USD — as long as each individual journal entry's accounts match its declared asset.

## Account Categories

Categories are free-form labels that describe the purpose of an account (e.g., `PAYMENT_ACCOUNT`, `PIX_ASSET`, `FEE_REVENUE`). They are normalized to uppercase automatically. Categories help you organize accounts by their business function.

## Balance Policies

Balance policies control whether an account's balance can go positive, negative, or both. They are applied per-side (debit or credit) in each journal entry. See [Balance Policies](/docs/concepts/balance-policies.md) for details.

## Consistency Guarantees

EntryTarget guarantees:

1. **Sum of all balances = 0** — the total across all accounts is always zero
2. **Per-asset balance = 0** — the sum of balances for each asset is independently zero
3. **Sequential versioning** — each account's version increments by 1 with no gaps
4. **Atomic transactions** — all journal entries in a transaction succeed or none do
5. **Balance evolution** — the ledger records the exact post-balance after each operation, and it evolves correctly (credit adds, debit subtracts)


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