Quick Go Through to Triple Entry Accounting and What Could Be Its Future?
Accounting has always been seen as the backbone of a business. Also known as bookkeeping, it’s not just limited to the calculation of profits and losses but also maintains the integrity of the business. Single and double-entry accounting is traditional and the most prominent method of accounting. However, with increasing concerns of digital data security, triple-entry accounting is tremendously gaining popularity.
First introduced by Yuji Ijiri, triple-entry accounting was proposed as a better alternative to double-entry accounting. Surprisingly, this accounting method proved to be revolutionary among most blockchain systems worldwide.
So, here is a quick guide on triple entry accounting and its future perspectives.
What is triple entry accounting?
Also known as momentum accounting, it is the latest and much more complicated system of accounting. Contrary to its name, triple-entry accounting does not actually consist of a third entry. Instead, a third element is added to the debit and credit system. This binding component is Blockchain that integrates the books/accounts and also helps link two distinct double entries, which you can view later for external auditing purposes.
Here, the most significant advantage is that a single firm does not hold the book, but is distributed across multiple related hosts; sometimes thousands! The data go through a contract that evidently records all transactions; product details, seller details, buyer details, etc.; it is digitally signed across the hosts.
Till now, most books of accounts consisted of former accounting methods of single and double entry. These methods were simple and more traditional, with no reliability and consistency among the hosts. In triple-entry accounting, all the data entries are sealed and secured through encryption by the third element called the blockchain. In this way, it reduces the rising concerns of accounting scams and other fraudulent activities.
Role of blockchain in triple entry accounting
The whole concept of triple-entry accounting is made possible with the help of the blockchain system. This software technology ensures that a single entity does not hold a particular record. Instead, it is distributed throughout the linked computing hosts. In this way, the data remains transparent, and each activity taking place is exposed to the holders.
Once an entry is made in the blockchain, the transaction gets recorded permanently in the records. All the contracts, purchases, bills, etc., would have a unique ID to ensure seamless tracking of all the separate data. Also, having a public ledger can prove an excellent audit record, keeping both parties updated with real-time status.
As the blockchain is automated and decentralized, there are no chances of alterations, removal, or misconduct by a single entity. So, accounting outsourcing services can now provide you with an efficient blockchain accounting that keeps all your business’s accounts accurate and trustworthy.
What are the benefits associated with triple entry accounting?
As the data gets distributed to all the related hosts, the authority no longer lies in one hand. Therefore, it results in consistency and reliability of data across the firms as it can be controlled equally by everyone.
A public ledger is introduced to all the associated firms to host all accounting entries independently. The data is publicly exposed, so there are fewer chances of misconduct as a single change in data can be seen by everyone.
As the data is linked to all the associated firms, the chances of error or confusion between two parties are less. In this way, the data entry remains accurate and is less prone to mistakes and omissions. Moreover, trusted accounting outsourcing services can help maintain the reliability and authenticity of the data.
The digital signature on the books creates records holding a higher level of reliability, as it is impossible to verify the same one if any alteration of the details took place. As a result, all participants possess the same information, simultaneously eliminating the problem of uneven data.
Also known as electronic contracts, this software is programmed to execute itself only when the corresponding details are fulfilled. Thus, related actions, such as payments, are performed automatically only when approved by a corresponding trigger.
Ultimately, more and more double-data entry systems are being transformed into the much more reliable and advanced technology of triple entry accounting.
What is the future of triple entry accounting?
As triple-entry accounting is a much complex framework, it can be challenging in the initial phase. However, the numerous advantages and modern approach can take the finance and accounting department of the businesses to a whole new era. Yes, triple-entry accounting emerges as a logical solution to put an end to trust and skepticism issues among the stakeholders.
For now, there are not so many companies that have adopted the triple entry accounting system. However, they can still not reach the optimum level because self-auditing ledgers require many participants. Nevertheless, an increasing number of companies depending upon the blockchain system can soon effectively understand related services like the triple accounting system.
More adoption and experience of this new and complex accounting system can bring considerable benefits to businesses in the near future. Besides increased accuracy and transparency, various business experts claim that the system can help analyze and predict an organization’s future position.
Overall, triple-entry accounting stands at a growing phase and sees massive potential in the next few years. Also, numerous small and medium-size businesses popping up now and then, they all look forward to a modern, time-savvy, and reliable finance and accounting outsourcing.That’s why there is no denying that triple-entry accounting is a groundbreaking solution to all accounting needs throughout the world.
Read here What Is The Major Difference Between Proactive and Procrastinate Accounting Outsourcing Company?
It is not the end of the profession; it’s an opportunity!
With automation taking place nearly in every industry, gone are the days of manual reconciliation. Triple entry accounting is a fully automated, reliable, and accurate way of accounting meeting all the modern-age needs. Now, for people seeing it as the end of the accounting profession, they need to adopt it as an opportunity. That’s right! An opportunity that allows accountants to automate mundane tasks to utilize their precious time and efforts provides valuable financial insights to the company.
The finance and accounting department can either be the strength or the weakness of your business. Therefore, if you are looking for a new and effective finance department, consulting an accounting outsourcing company is the best way. They can help you understand and implement triple entry accounting for your growing business.
If you are looking for accounting services for your business then call today on +1 201-778-0509 or you can drop your inquiry at [email protected]