As the financial sector changes and new advancements are made, the way we handle our funds is also shifting. In modern accounting systems, there is a double-entry bookkeeping format. The term ‘double-entry’ refers to a single transaction being recorded twice. One log registers as a debit, taking the actual money while the other is a credit, a promise to pay that puts a hold on the account that is released following processing. These conditions are also referred to as assets and liabilities and refer to the risks associated with being a consumer and seller. There is now a newer system that uses triple entry accounting. It might seem like an extra, unnecessary step but the changes of the digital market need it.
In a sense, double entry book keeping is now dormant. It is standardized by the pairing of double entries connected by a central list of receipts—three for each transaction. That process is termed triple entry bookkeeping where accounting is mainly based on three by three entries—the natural roles of a transaction.
Digitally signed receipts are no longer the dominant channel in processing because it falls short, although it dominates in information terms. Though double entry book keeping still plays a role in processing, the term triple entry endorses an advance in accounting.
Financial statements are a vital part of a firm's accounting. Users of those reports depict their assertions based on the following.
Triple entry accounting is not necessarily a new financial system but rather an addition to the most common ones practiced. The current standard is double-entry accounting and requires information from both parties involved (a service provider and consumer). Typically, each party is responsible for maintaining their own financials records. However, this can lead to fraud or other errors. The use of triple-entry accounting reduces this risk by keeping a non-biased record.
As the use of triple entry accounting is still developing, there might be some technical issues. Most systems are built around a double-entry format and only receive data from each independent user. It might become difficult to perform audits or overhauls of financial records if there is a third, but uncategorized source.
Some of what’s required for triple entry accounting to function properly is: large storage areas for data, secure and consistent identity verification for digital signatures, streamlines messaging and a strongly incorporated standalone payment function. Having these element vetted and available for public consumption will assure easier transition into using triple entry systems across various businesses.
A blockchain accounting system is a digital record collection that is secure because the data cannot be overwritten once it has been created. This is the by-product of a properly functioning double entry accounting system. Combined, the three elements create a more stable method of tracking purchases and transaction histories across companies.
One of the primary aspects of triple entry accounting is to not separate it completely from its double entry predecessors. While the digital records are great for receipt and transaction tracking, it does not address the actual process of currency exchange. As such, creating a relationship on top of the current system is needed for the financial industry’s advancement.
Better security is always a popular topic when it comes to consumer spending. Protecting our money is important and being able to verify or challenge purchases is part of consumerism. Receipts often get lost and unfortunately, there are those would commit financial fraud for personal gain. Triple entry accounting will help limit financial fraud. By acting as another link in the chain of processing payments, it will reinforce the long-established double entry system and add both security and convenience.