This is a guest post contribution from Eric Glinsky, CPA, MST, a partner at AbitOs.
The most common bookkeeping system and foundation for general accounting systems is known as “double-entry” bookkeeping where every transaction is recorded in two different accounts: a debit to one account and a credit to another.
For example, if a business purchases and finances new equipment for $10,000, they would record a fixed asset on the balance sheet for $10,000 as a debit and record a liability for $10,000 as a credit to record the debt. This will result in producing two corresponding and opposite entries to two different accounts, always resulting in an equal adjustment to assure the ledger is in balance.
While double-entry accounting serves as one of the most important accounting systems in the profession today, it is limited in its reliability and assurance, especially as it comes to digital currency and blockchain technology. Some of the negative limitations of double-entry accounting are; the ledgers can be easily manipulated and changed, adjustments are based on personal judgment and human error and it may be difficult to locate an error when amounts are incorrectly recorded.
Triple-entry accounting, on the other hand, is an accounting method for which a third component is added to the debit and credit accounting system.
The term triple-entry accounting is somewhat misleading as it’s not a third entry that is being created, but simply adds a third component known as the Bitcoin network with underlying “blockchain” technology to the double entry accounting in order to link every aspect of a transaction and essentially seal it (the third entry) so it can never be altered or deleted.
By utilizing this technology, it will revolutionize the accounting process and establish a public ledger in real time, which will greatly reduce errors and fraud and create an audit trail for every aspect of a transaction.
This revolutionary blockchain technology will protect information and communications within the accounting process and will create complete transparency throughout the entire accounting and auditing process. I believe Bitcoin will disrupt the global accounting industry.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.