Three-style bookkeeping and blockchain – two concepts that are easily misunderstood

nRunaway Comment: Blockchain in the audit Although the application has been a lot of people’s attention, but its operation is not clear enough. SoftLedger’s CEO wrote this article explaining common auditing practices, highlighting the advantages of blockchain in this area, highlighting the potential of the blockchain to reverse the accounting process and giving a great deal of recognition to the role of this new technology, Also make people begin to look for the appearance of relevant application.n
nTranslation: Inan
If you’ve been following Bitcoin, Ethereum and other cryptocurrencies for the past year, you probably heard a lot about the blockchain and its potential to revolutionize multiple industries. Another recurring concept is called triple-entry accounting. Three-book accounting is a high-end accounting alternative that includes a third component in addition to debit and credit under the global standard definition. This is an interesting concept as it will be largely free of the double entry bookkeeping method on which the business world has relied for centuries. However, this has nothing to do with the blockchain.n
In order to interpret both, it is best to quickly provide some background information on double-entry, blockchain and three-way accounting.n
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Double entry bookkeeping methodn
In the late fifteenth century, merchants in Venice developed a new method of tracking finance: the double entry method. Previously, they reviewed the cash balance at the end of each day and recorded the related transactions that affected the cash flow. The problem with this approach is that cash flow can not provide complete information about the operation. Double entry bookkeeping takes into account the other side of the transaction, and this side also leads to an increase or decrease in the owner’s equity, which is crucial when managing corporate finance and needs to be taken into account.n
When using the double entry method, one has to evaluate the overall impact of the transaction. Debit must be equal to credit, which requires people to determine the transaction number of the parties to the transaction. Whenever a company buys goods, issues shares, or pays its wages, there are two sides to the deal. In the complex case, the other party to the entry ensures that the company has a definite understanding of the basic nature of the transaction or they will not be able to record it.n
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Blockchainn
Blockchain is a digital book spread across multiple locations to ensure safe and easy worldwide access. Currently, this technology is mainly used for Bitcoin and other cryptocurrencies, but the blockchain will completely subvert the accounting process we are familiar with – it’s only a matter of time.n
Using blockchain to record all transaction-specific information in real time and record across multiple parties can be very powerful. Applications that automate business processes seem to be endless, especially in terms of payment and control. For this reason, a common misconception arises that the writing of each piece of information into the blockchain is actually the third. In fact, this is not the case.n
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Three-way accounting methodn
The three-way accounting method is an academic concept envisioned by Professor Maruichi Ito, of Carnegie Mellon University. It provides a new accounting methodological framework, replacing a standard accounting formula (asset = debt yield) with a more complex framework.n
At its core, Wellbore retains the familiar concept that wealth changes equal income (in fact, the same as a standard accounting formula) and adds new concepts to provide more information on how the organization will evolve . The idea is that accounting can be fundamentally linked to forecasting so that better strategic decisions can be made.n
There is no conclusion as to whether this alternative accounting approach should be pursued, but it has not yet been significantly used. It seems to me that it is impractical to use a more complex system even if regulators and companies are able to get out of double entry. It is hard to remember accounts in only two cases.n
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in conclusion n
Although the three-way bookkeeping method is not suitable for use, there are many benefits to writing transactions in blockchain transactions. Like the journals currently recorded in the ledger and ledger, recording transactions in the blockchain will provide visibility into the transactions involved.n
For example, once a contract has been signed, a blockchain can be created and a purchase order can be issued for that contract, a payment can be made based on the purchase order, and any problems that arise during this process can be tracked. In this chain there will be a unique ID associated with the “contract / purchase order / bill” to link all these separate parts together.n
Having a book that easily shows the entire associated transaction string will not only provide excellent audit records, but also allow both parties to the transaction to update their status in real time. Whenever a new record is added to the blockchain, both parties can immediately see the update. In addition, people can restrict access to transactions through blockchain technologies such as Ethereum. As the technology advances and is widely adopted, I look forward to its next development. It is only the beginning.n

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