Accounting model

This section presents the Formance Ledger accounting model.

An accounting model represents financial movements within a business. It defines an account, the equation determining an account's balance, and a transaction. It also lays down the rules for handling accounts and transactions, called constraints. This framework helps ensure that financial records are kept accurately and consistently, making tracking and managing financial activities easier.

The Formance Ledger does not use a classical double-entry accounting model. Instead, it uses the source-destination model, which offer several advantages over the classical model.

First, we will describe the components of an accounting model (accounts, transactions, constraints). Then we will present the source-destination model and its advantages. Finally, we will see how you can translate a double-entry accounting model into a source-destination model and how to implement common use cases.