Finance / Accounting Unit Check¶

Domain unit audit — instantiates Dimensional Consistency Check

Separates money-like quantities that share a currency symbol but are not interchangeable — nominal vs. real, one-time vs. recurring, cash vs. accrual — before they are added or compared.

Finance / Accounting Unit Check is the domain-specialized check for the one place a naive unit check fails hardest: money. Everything wears the same dollar sign, so quantities look commensurable that absolutely are not. Its defining concern is meaning behind the symbol — the same "$1,000" can be a one-time cost or an annual recurring one, a nominal figure or an inflation-adjusted real one, cash received or revenue accrued, this year's dollars or a present value. The units match; the constructs do not. This mechanism makes those distinctions explicit and rules on which additions and comparisons are legitimate, catching the money-like quantities that the currency symbol quietly disguises as interchangeable.

Example¶

A team compares two vendor proposals. Option A is a $500,000 one-time software licence; Option B is a $120,000 annual subscription. A quick look says A costs "more," and a naive spreadsheet subtracts one from the other. The finance unit check refuses the subtraction: a one-time cost and a recurring cost are different quantities — a stock of dollars versus a flow of dollars per year — and cannot be compared until put on a common basis. Over a five-year horizon B is $600,000 nominal, already more than A.

Then the meaning check goes a layer deeper. Those five annual payments arrive in future dollars, so comparing their raw sum to today's licence price mixes nominal and present-value amounts.^[1] The correction is to state the basis explicitly — a five-year present value at the firm's discount rate — and only then compare. The output is not merely a number but a ruling: these two quantities were not addable as written; here is the common basis on which they are, and here is the comparison that basis makes legitimate.

How it works¶

Tag each amount's construct. Beyond the currency, record whether the figure is one-time or recurring, nominal or real, cash or accrual, and which period and price level it lives in.
Rule on the operation. State which additions, comparisons, and aggregations are legitimate given those tags — a one-time and a recurring amount are not directly addable; nominal and real figures are not directly comparable.
Put quantities on a common basis before combining. When an operation is wanted across incompatible constructs, specify the conversion — annualize, discount to present value, deflate to real terms — that makes them commensurable.
Record the basis with the result. The chosen basis (discount rate, base year, horizon) travels with the comparison so it can be checked and reproduced.

Tuning parameters¶

Basis of comparison — nominal, real, or present value; and if present value, the discount rate. This choice can flip which option looks cheaper, so it is the highest-stakes dial.
Horizon — the time window over which recurring amounts are accumulated. A longer horizon favours one-time costs; a shorter one favours subscriptions.
Construct granularity — how many money-type distinctions you track (just one-time vs. recurring, or the full cash/accrual/nominal/real matrix). More granularity catches subtler errors at more overhead.
Materiality floor — how large a mismatch has to be before it is worth reconciling rather than noting.

When it helps, and when it misleads¶

Its strength is catching the errors that hide behind a shared currency symbol — comparing one-time to recurring, nominal to real, this-year to present-value — which are among the most common and most consequential in financial reasoning precisely because the units look fine.

Its risks are domain-specific. The basis choice is a genuine judgement, and because it can flip the verdict, it is the classic lever for running the check backwards — picking the discount rate, horizon, or basis that makes the already-preferred option win. It can also over-formalize, discounting soft or strategic considerations into a precision they do not deserve. The discipline is to fix the basis before seeing which option it favours, state it openly with the result, and show the comparison under a second basis when the choice is contestable.

How it implements the components¶

quantity_semantics — its core work: distinguishing constructs (nominal, real, one-time, recurring, cash, accrual) that share a currency unit but mean different things.
operation_compatibility_rule — it rules on which money quantities may be added or compared, and which may not without a common basis.
correction_rule — when an operation crosses incompatible constructs, it specifies the fix: annualize, discount, or deflate onto a shared basis.

It does not build the underlying variable-and-unit inventory of the model (that is Spreadsheet Unit Audit or Dimensional Analysis Table), nor separate the stock-versus-flow structure in the general case (that is Stock / Flow Separation Check); it specializes the meaning check to money.

Instantiates: Dimensional Consistency Check — the archetype specialized to financial quantities, where a shared currency symbol hides incompatible constructs.
Sibling mechanisms: Stock / Flow Separation Check · Spreadsheet Unit Audit · Cross-Scale Transfer Review · Dimensional Analysis Table · Dimensionless Ratio Construction · Engineering Equation Sanity Check · Model Input / Output Contract · Normalized Metric Design · Per-Capita or Per-Unit Conversion · Unit Check · Unit Conversion Workflow

Notes¶

The one-time-versus-recurring distinction is a money-specific instance of the general stock/flow problem handled by Stock / Flow Separation Check; this mechanism carries the extra financial constructs — nominal/real, cash/accrual, present value — that the general check does not. When both apply, run the general separation first, then this domain layer.

References¶

[1] The distinction between nominal values (in the dollars of the year they occur) and real or present values (adjusted to a common price level or discounted to today) is standard in finance; mixing them is a meaning error even though the currency unit is identical. ↩