E.g, this would be correct:
increase bank
increase equity
increase bank
increase receivables
If, on the other hand, you encode the sign in the amounts then the sign would disagree with the semantics of the label and you would have to flip signs based on the account type at the time of recording the entries:
increase bank $100
increase receivables -$100
That's right. The distinction is based on whether the account represents an asset or a liability.
> increase bank
> increase receivables
You would have to define what you mean by "bank" in order for this to make sense. But in general, receivables represent money that a company is owed from orders that have not yet been paid for, i.e. they are a effectively a loan from the company to its customer, and like all loans they are an asset to the creditor, which in this case is the company. When a payment is made against an outstanding receivable, the receivable is debited (the loan balance is reduced) and the company's cash balance is credited. Because cash and receivables are both assets, these add together and cancel out just as you would expect.
The rules under my system are still very simple:
1. Every financial asset is someone else's liability, and vice versa. Cash is an asset to its owner and a liability to society at large. Loans are assets to the creditor and a liability to the debtor. Purchase orders are a liability to the purchaser and an asset to the supplier. Etc. etc.
2. Every financial transaction is a change in someone's liability coupled with a change of equal magnitude in someone else's assets.
3. The absolute value of your assets minus the absolute value of your liabilities is your net worth.
A completely equivalent formulation is that liabilities have negative signs attached to them, and then your net worth is the sum of your assets and liabilities, but this is just a question of where you hide the negative sign. A - B is the same as A + (- B). It really doesn't matter except insofar as one convention might make it easier to think about things. Most people are used to seeing their liabilities expressed as positive numbers, i.e. if you owe money on your credit card bill, the balance due is positive, and if you have a credit balance, the balance due is negative. But it's all just a shell game with where you hide the signs.
Instead of grouping together accounts into credit-normal and debit-normal, to make things balance, I think it’s more intuitive to group accounts by usage and use negative numbers.
Asset and Liability accounts appear on a Balance Sheet and are called State accounts. State accounts track the current state of your net worth.
Income and expense accounts appear on an Income Statement and are called Change accounts. Change accounts since they track why your net worth changed.
Bank means bank ledger account. The bank balance and receivables cannot both increase because they are both assets.
>That's right. The distinction is based on whether the account represents an asset or a liability. ... A completely equivalent formulation is that liabilities have negative signs attached to them
Understood. My point was merely that you cannot just change the labels.
The downside of this approach is that you would no longer be able to see whether a journal entry balances out based on the labels alone.