Next: Defining flows Up: Creating a banking model Previous: Entering accounts
Flows between accounts are entered by typing text labels in the accounts involved. The source label is entered as a simple name--for example, if Patient is lending money to Impatient, the word “Lend” could be used to describe this action. Firstly you need to create a row beneath the “Initial Conditions” row (which records the amount of money in each account when the simulation begins). You do this by clicking on the `+' key on the Initial Conditions row. This creates a blank row for recording a flow between accounts.
The cell below “Initial Conditions” is used to give a verbal description of what the flow is:
The flows between accounts are then recorded in the relevant cells underneath the columns. Here we will start with putting the label “-Lend” into the Patient column. It is negative, because Patient is lending to Impatient.
Notice that the program shows that the Row Sum for this transaction is currently “Lend”, when it should be zero to obey the double-entry bookkeeping rule that all rows must balance. This is because a destination for “Lend” has not yet been specified. Please note that different asset class columns follow different +ve and -ve rules, so an asset and a liability with the same value might need to both be +ve or both -ve to sum to zero. The destination is Impatient's account, and to balance the row to zero this part of the transaction must be entered as “Lend”:
The accounting equation also applies to the Initial Conditions (the amount of money in each of the accounts prior to the flows between accounts): the Initial Conditions must balance. This requires that there are entries on the Asset side of the Banking ledger that exactly match the sum of Liabilities and Equity:
As you enter flows, these appear on the left hand side of the bank block:
