Future of Accounting- Triple Entry Accounting System

Triple Entry Accounting System

“It’s tough to lie when everybody is watching.”- Ian Grigg.

An outstanding concept conceived by the late Yuji Ijiri, a professor at Carnegie Mellon University, Triple-Entry Accounting presents a framework for a new and complex way of doing accounting. The concept has come into focus in recent years when Ian Grigg who associated it with blockchain technology and popularized it as he believed that accounting should no longer be completely private.

It is very?essential to understand what is a blockchain and how does it work?

Blockchain refers to a digital ledger that is distributed among multiple locations to ensure security and ease of access globally. At present, this technology is primarily used for Bitcoin and other cryptocurrencies. It has just penetrated the accounting processes, but domain experts opine that it’s only a matter of time until it will entirely disrupt them.

The term Triple-Entry Accounting is somewhat misleading as there?isn’t any third entry; instead, a third component is added to the debit and credit system.?The common thread or the binding component is Blockchain which links the books together and helps in linking two separate double entries and can potentially be viewed for external auditing purposes.

So, instead of individual firms having their own books for the transaction, they go through a contract that evidently includes every aspect of a transaction; what the product was, who the seller is, who the buyer is, etc., and above all, it’s digitally signed.

In the Triple-Entry Accounting system, all accounting entries are?cryptographically sealed by a third entry,?and thus, it works as a deterrent towards manipulations and financial fraud. In traditional Double-Entry Accounting, a company’s ledger can be compromised by any weak human links, an employee, a bookkeeper, or even an auditor. But this unique system of Triple-Entry Accounting leaves no space for any corrupt, weak human link as it is immutable.

As?blockchains are completely automated and decentralized, once an entry is recorded,?it cannot be edited, altered, or removed. The highest level of encryption technology ensures the accuracy of each transaction, digitally signed, leaving no gaps for errors and, at the same time, verifiable by all.

The transactions recorded on the Blockchain using triple entry simplify the entire double-entry accounting process?as once a transaction is recorded on the Blockchain by one of the two accountants, the other party can also view the particular double entry, easily review it, and have it recorded automatically in its own books.

Thus, Triple-Entry Accounting is set to potentially revolutionize the future of bookkeeping as Blockchain accounting will literally halve the double-entry transactions recorded. This will assist the bookkeepers greatly by saving their time and providing them the opportunity to focus more on value-added roles within the profession.

Thus, the Triple-Entry Accounting system undoubtedly has considerable benefits, and as a ledger that shows up the entire string of transactions, whether bills generated or paid, etc., it would prove to be an excellent audit record. A real-time status update is another major benefit. At the same time, accessibility from anywhere at any time is a much-needed convenience.

Today companies may not be prepared for this disruption, but this unique technology will gradually evolve and witness widespread adoption; this is just the beginning of a new era in accounting.