Triple-Entry Accounting Based on Blockchain
What is Triple-Entry Accounting?
Triple-Entry Accounting is an accounting system where all accounting records are proofed and maintained by a third party, e.g. a service provider based on blockchain platform and recorded in a joint, distributed book. It was created by Yuji Ijiri in 1989 and further developed by Iran Grigg in 2005. Instead of recording the transactions in separate books held by the parties involved, Triple-Entry Accounting allows all transactions recorded on a shared book managed by the third party. The participation of blockchain in this process even makes accounting much simpler and easier.
How does it work?
Just take an example of four transfers between Company A and Company B.
In double-entry accounting, which is most widely used currently, each company will record these transactions into their own books, and the accounting results will be like this:
However, if they use Triple-Entry Accounting system, the two books can be merged into one that is maintained by the third-party service provider. People can easily track the transcations and get an overview of the cash flows. They develop a better understanding of the related businesses of these two companies based on the new accounting method. The accounting results will be like this:
In this scenario, an effective and trustworthy third-party platform is required. Blockchain as a transparent, public network can perfectly satisfy this need.
- The computer-based system of Blockchain decreases the operational cost, erases the limitation of time and location of businesses, and thus enables a system with high efficiency.
- Meanwhile, the automatic crypto-fingerprint of records on Blockchain reduces the possibility of secretly deleting or altering the original record, and makes Blockchain a safe and trustworthy platform for data storage.
Why should you adopt Triple-Entry Accounting with Blockchain?
- Reduced cost: With Triple-Entry Accounting system based on Blockchain, people will possibly save a lot in reporting, business operations and compliance, as Blockchain will complete all the related works fast, accurate and with few artificial participation.
- Less fraud: Triple-Entry Accounting based on Blockchain will significantly minimize the possibility of manual frauds, as the computer-based system do all the matching, recording, calculating and checking works automatically.
- Better management support: Blockchain-based Triple-Entry Accounting system will make real-time data as well as a clearer picture of the cash flows available for managers. It will significantly facilitate decision making as well as strategy making and operation of the company.
Explore more about Triple-Entry Accounting & Blockchain with FAE Consulting!
Are you planning to apply Blockchain-based Triple-Entry Accounting in your company? Feel free to contact FAE Consulting via e-mail.
Former articles:
Blockchain: An Overview
How will Blockchain change accounting?
References:
PYMNTS: Blockchain Tracker: Cost-Saving Opportunity
Forbes: Triple-Entry Accounting And Blockchain: A Common Misconception
Forbes: Triple entry accounting & Block Chain: Are they vaccines for financial scams?
CEO Blog: Triple Entry Accounting, and Secure Block Chain Ledgers.
Picture: Pixabay
