I can't agree. I recently started to properly learn double-entry book keeping and in fact I tried to make as much as I could and let me tell you, I never knew how much I had - at least truly knew it. I only had an inkling how much I had spent, and I often got it wrong. This stressed the living day lights out of me, especially with a large mortgage.

So... This month - being the start of the financial new year, I started collecting all my receipts. Then I installed GnuCash and setup their basic chart of accounts. Everything started at a zero balance.

So then I started to really get how double entry book keeping. I suddenly realised the balancing equation made sense:

  Assets = Liabilities + Equity

So this is what I did to set it up:

1. I worked out all my current assets' balances. This included cash accounts, bank savings accounts and cheque accounts. I took the closing balances from 30 June and debited them to each of the accounts. To balance out the equation I credited the equity account called "Opening balances".

2. I then looked at all my fixed assets - cars, house, etc. - and debited the purchased amount of the asset to the relevant fixed asset accounts, then for each transaction I credited the opening balance equity accounts to balance the transactions.

So now my assets side of the equation equalled my equity side of the equation.

3. Then I took all my liabilities and did similar transactions, only in reverse. So I took my home loan and credited the balance from 30 June, then debited the same amount to the opening balance equity account.

So now my assets value is the same as my liabilities plus my equity.

4. So then I took all my reciepts and debited the appropriate accounts, and credited the appropriate current asset account or debited the appropriate current liability account (e.g. Credit card).

5. I take my income and then credit it to my income accounts, and debit the corresponding current asset accounts.

6. I take any loan repayments and credit the current asset accounts, and debit the loan accounts (liabilities) by equal amounts.

So now the equation is:

  Assets = Liabilities + Equity + Income - Expenses

At this point I realised: double entry book keeping is really just recording the flow of money through a system. Income flows into the system, increases the assets or decreases the liabilities, and then flows out of the system when expenses are incurred. The equity or capital is just the assets less your liabilities. You really want to avoid negative equity, but at least you can track income and expenses effectively.