Income statement shows 'Net profit' when it should be loss

[floriskruisselbrink]

Hello!

Numbers are all correct, but there is a slight issue with the income statement when total income is less than total expenses: the result is still called 'Net Profit', although it actually is a net loss.

The only difference between loss and profit is the presence/absence of the minus-sign in front of the number, but I would argue this is a little misleading. I can think of two possible solutions:

1. Change the text (and all translations) 'Net Profit' to be 'Net Loss'(??) if the number is positive
2. Move the number to the expenses column (and also change the text)

[AceDexter]

This was really confusing to me at first as well, but then I did some digging and realized that this is actually the correct and expected behavior when using Beancount and double-entry accounting.

Beancount follows a consistent double-entry convention (detailed in the docs here: https://beancount.github.io/docs/the_double_entry_counting_method.html#income-statement) where:

• Income accounts normally carry negative balances (receiving salary "reduces" the income account as money moves to your assets).
• Expenses accounts normally carry positive balances (spending "increases" the expense account).

When generating an income statement:

• Total income is shown as a negative number.
• Total expenses as a positive number.
• Net income/profit is calculated as Income + Expenses.

If you earned more than you spent (a profit/surplus), the net result is negative — which indicates money added to your net worth (assets increased more than liabilities). If you spent more than you earned (a loss/deficit), the net result is positive — meaning your net worth decreased.

I've been using Fava and Beancount for my own personal finances for about two years now and have gotten used to negative being a good thing and positive (no sign) being something to be concerned about.

That said, if the raw signs feel too counterintuitive, Fava provides a fava-option to flip them: add this to your Beancount file to invert the display of Income, Liabilities, and Equity accounts in reports and charts (while keeping the underlying accounting consistent):

2016-06-14 custom "fava-option" "invert-income-liabilities-equity" "true"

[floriskruisselbrink]

This was really confusing to me at first as well, but then I did some digging and realized that this is actually the correct and expected behavior when using Beancount and double-entry accounting.

Thanks for the explanation, but this was already clear to me. I know the numbers are correct. The only mistake is the word 'profit' when there is no profit. That is the only thing I think is wrong.

[...]
That said, if the raw signs feel too counterintuitive, Fava provides a fava-option to flip them: add this to your Beancount file to invert the display of Income, Liabilities, and Equity accounts in reports and charts (while keeping the underlying accounting consistent):

2016-06-14 custom "fava-option" "invert-income-liabilities-equity" "true"

The sign is not what feels counterintuitive to me. I know income is displayed negative. My only problem is the text. I believe you should never call something 'profit' if in fact it is a loss. Doesn't matter if you display that loss as -123 or as 123, the text is wrong.

[yagebu]

I think we should stay consistent here and not change the name depending on the sign. This is just a sum of account values, it's no different then just e.g. Income, which could also contain losses and I'd find it confusing and inconsistent to flip the name without flipping the sign. On https://en.wikipedia.org/wiki/Net_income, I couldn't find any mention of this term just being used if it's "positive".

If there's better suggestion how to name this sum, I'm open to change it.

[floriskruisselbrink]

Agreed that magically changing the text depending on sign of the result is not the best solution.

Any opinions about my second proposed solution? Why not move the sum to the expense column if it's a loss instead of a profit?