3.6 Billion or 7.2 Billion?

[sammymaguire]

H3ad Ma$H this thead!! 

[Gaoth Dobhair Abu]

Opened this thread thinking it was about the worlds population and someone at the UN had miscounted/cocked up the figures! 

[AQMP]

According to the Department of Finance an error has been found whereby the national debt is €3.6 Billion less than we thought because of an accounting error. Apparently, a transfer of money from the NTMA to the Housing Finance Agency was treated as a liability by both organisations.

I'm not versed in the wonders of double-entry bookkeeping, but I was taught in school that when you add -3.6Bn to -3.6Bn, as seems to have been done in this case, you get -7.2Bn and when you correct that and do the transaction as it should have been done by adding -3.6Bn to one organisation's balance sheet and +3.6Bn to the other's you get zero. In other words, the books of the state (which owns both organisations)  were mistakenly debited by €7.2Bn when the actual effect should have been zero. Therefore, we're €7.2Bn, not €3.6Bn less badly off than we thought we were.

What am I missing?

I cannot see for the life of me how this could have happened.  For every debit, there must be a credit...

[AQMP]

I've no idea. I only know what you posted. My interpretation is as follows:

If I borrow 100 euro from you and then give it to my mate, we don't owe 100 each to you, which appears was the mistake here. I transfered the debt, so only my mate owes 100. That doesn't leave me 100 in the black however.

I'm struggling, too. the maths are clear, but accounting is a bit of a mystery. Here's how I see it. (Remember, we're only discussing whether the state is 3.6Bn or 7.2Bn better off than it thought it was):

To continue your personal loan analogy, take a family situation and replace the state, NTMA and HFA with my family.

Let's say my family's total assets are made up of  -3,000 of mine, +1,500 of the wife's and +250 owned by each of the two lads. That adds up to -1,000 as the sum total of all the family's assets. We're 1,000 in the red.

Now my eldest son lends 100 to the other lad. He enters this in his accounts as a debit and the other lad enters it in his accounts as a debit also. So now the books show that they now own 150 each. We do the accounts and we now find that I still have -3,000, herself still has +1,500 and the lads now have 150 each. That's a total of -1,200 now owned by the family. We're now 1,200 in the red, or so we think.

Then we get Shamrock Shore in to do the accounts and he sees the mistake. The accounts should read: Me, -3,000, her, +1,500 Son A, 350, Son B, 150, making a total of -1,000.

The family as a whole is 200 better off than we thought we were, not 100.
[Edit - the difference between this and your loans to your mate is that the assets of both these organisations belong to the state (I think).]

Two accounting mistakes here Hardy, both your cubs should enter this transaction as a debit and a credit.  After the €100 is lent by Hardyín, his account should read +€250 as he has cash/bank of €150 and a debtor of €100.  When Hardyínín gets the €100 his account should read +€250 as he has cash/bank of €350 and a creditor of €100.  Simples...which is why I can't work out why the NMTA and the HFA didn't treat their transaction, in the words of ABBA, in quite a simliar way

[mayogodhelpus@gmail.com]

How do you make an "error" like this ?  Somebody on TV3 picked it up apparently.

Who is to say what Ireland really owes ??

Ya I heard we actually bought Alaska & Bavaria and the Department of Finance forgot.

[Hardy]

I've no idea. I only know what you posted. My interpretation is as follows:
If I borrow 100 euro from you and then give it to my mate, we don't owe 100 each to you, which appears was the mistake here. I transfered the debt, so only my mate owes 100. That doesn't leave me 100 in the black however.

I'm struggling, too. the maths are clear, but accounting is a bit of a mystery. Here's how I see it. (Remember, we're only discussing whether the state is 3.6Bn or 7.2Bn better off than it thought it was):
To continue your personal loan analogy, take a family situation and replace the state, NTMA and HFA with my family.
Let's say my family's total assets are made up of  -3,000 of mine, +1,500 of the wife's and +250 owned by each of the two lads. That adds up to -1,000 as the sum total of all the family's assets. We're 1,000 in the red.
Now my eldest son lends 100 to the other lad. He enters this in his accounts as a debit and the other lad enters it in his accounts as a debit also. So now the books show that they now own 150 each. We do the accounts and we now find that I still have -3,000, herself still has +1,500 and the lads now have 150 each. That's a total of -1,200 now owned by the family. We're now 1,200 in the red, or so we think.
Then we get Shamrock Shore in to do the accounts and he sees the mistake. The accounts should read: Me, -3,000, her, +1,500 Son A, 350, Son B, 150, making a total of -1,000.
The family as a whole is 200 better off than we thought we were, not 100. [Edit - the difference between this and your loans to your mate is that the assets of both these organisations belong to the state (I think).]

Two accounting mistakes here Hardy, both your cubs should enter this transaction as a debit and a credit.  After the €100 is lent by Hardyín, his account should read +€250 as he has cash/bank of €150 and a debtor of €100.  When Hardyínín gets the €100 his account should read +€250 as he has cash/bank of €350 and a creditor of €100.  Simples...which is why I can't work out why the NMTA and the HFA didn't treat their transaction, in the words of ABBA, in quite a simliar way

That's more correct than mine.

Correction. It's correct. Mine was incorrect.

But the outcome is the same - I think the state is €7.2Bn better off than it thought it was, not €3.6Bn (if both organisations' finances are on the state's balance sheet).

[AQMP]

How do you make an "error" like this ?  Somebody on TV3 picked it up apparently.

Who is to say what Ireland really owes ??

Ya I heard we actually bought Alaska & Bavaria and the Department of Finance forgot.

That's more correct than mine.

Correction. It's correct. Mine was incorrect.

But the outcome is the same - I think the state is €7.2Bn better off than it thought it was, not €3.6Bn (if both organisations' finances are on the state's balance sheet).

H, if both organisations made an accounting error in the treatment of this transaction (as the two boys did in your example, sheesh what do they teach in schools these days!) then I would guess the state is €7.2bln better off.  If only one error was made the state should be €3.6bln better off...I think!

[Hardy]

Sorry - I made a bags of the above post by quoting MGHU instead of AQMP. Fixed now.

[AQMP]

Meant to add if an error(s) of this nature was made the in-house accountants should get a straight red and 48 weeks!

[bcarrier]

DRS and CRS here ....http://namawinelake.wordpress.com/

and apres match knew ..the man forgot 


http://www.youtube.com/watch?v=WHTNTptUEe8&noredirect=1

[ONeill]

I've no idea. I only know what you posted. My interpretation is as follows:

If I borrow 100 euro from you and then give it to my mate, we don't owe 100 each to you, which appears was the mistake here. I transfered the debt, so only my mate owes 100. That doesn't leave me 100 in the black however.

I'm struggling, too. the maths are clear, but accounting is a bit of a mystery. Here's how I see it. (Remember, we're only discussing whether the state is 3.6Bn or 7.2Bn better off than it thought it was):

To continue your personal loan analogy, take a family situation and replace the state, NTMA and HFA with my family.

Let's say my family's total assets are made up of  -3,000 of mine, +1,500 of the wife's and +250 owned by each of the two lads. That adds up to -1,000 as the sum total of all the family's assets. We're 1,000 in the red.

Now my eldest son lends 100 to the other lad. He enters this in his accounts as a debit and the other lad enters it in his accounts as a debit also. So now the books show that they now own 150 each. We do the accounts and we now find that I still have -3,000, herself still has +1,500 and the lads now have 150 each. That's a total of -1,200 now owned by the family. We're now 1,200 in the red, or so we think.

Then we get Shamrock Shore in to do the accounts and he sees the mistake. The accounts should read: Me, -3,000, her, +1,500 Son A, 350, Son B, 150, making a total of -1,000.

The family as a whole is 200 better off than we thought we were, not 100.
[Edit - the difference between this and your loans to your mate is that the assets of both these organisations belong to the state (I think).]

Any pics of the wife?

[Main Street]

According to the Department of Finance an error has been found whereby the national debt is €3.6 Billion less than we thought because of an accounting error. Apparently, a transfer of money from the NTMA to the Housing Finance Agency was treated as a liability by both organisations.

I'm not versed in the wonders of double-entry bookkeeping, but I was taught in school that when you add -3.6Bn to -3.6Bn, as seems to have been done in this case, you get -7.2Bn and when you correct that and do the transaction as it should have been done by adding -3.6Bn to one organisation's balance sheet and +3.6Bn to the other's you get zero. In other words, the books of the state (which owns both organisations)  were mistakenly debited by €7.2Bn when the actual effect should have been zero. Therefore, we're €7.2Bn, not €3.6Bn less badly off than we thought we were.

What am I missing?

What are you missing?
You are misinterpreting the information and making presumptions based on that.  The 3.6bn debt was recorded twice when it should only have been recorded once, by one agency.
Therefore Ireland ink is only 3.6bn less in debt.

[Hardy]

Sorry. Can you make it simpler for me? Where am  wrong in the family analogy?

[mayogodhelpus@gmail.com]

Sorry - I made a bags of the above post by quoting MGHU instead of AQMP. Fixed now.

Are you don't work for the Department of Finance 

[Main Street]

Sorry. Can you make it simpler for me? Where am  wrong in the family analogy?

I didn't say you were wrong in your family analogy, just that you misinterpreted the information about the 3,6bn bookkeeping error.
I didn't read your family analogy nor did I quote it.