Triple Entry System of Accounting using DLT
Way back in 1989 Japanese accounting researcher Yuji Ijiri, who was also a professor of Accounting and Economics Carnegie Mellon University, published a monograph, entitled “Momentum accounting and triple-entry bookkeeping,” but hadn’t found a way to apply it.
In the year 2005 Financial cryptographer Ian Grigg wrote a paper of Triple-Entry Accounting, where he states “The digitally signed receipt, an innovation from financial cryptography, presents a challenge to classical double entry bookkeeping. Rather than compete, the two melded together form a stronger system. Expanding the usage of accounting into the wider domain of digital cash gives 3 local entries for each of 3 roles, the result of which I call triple entry accounting.”
Ideally, from the Ian Grigg’s Paper on Triple Entry Accounting doesn’t necessarily mean a third entry has to replace the double entry system. The Third Entry is basically a cryptographically sealed entry on blockchain by 2 parties to a single transaction jointly instead of on separate books of accounts of each of the parties.
For Example: A(Seller) books a debit to account for cash received, while a B(Buyer) books a credit for cash spent in the same transaction, but in separate sets of accounting records. This is where the blockchain comes in, rather than these entries occurring separately in independent sets of books, they occur in the form of a transfer between wallet addresses in the same distributed, public ledger, creating an interlocking system of enduring accounting records. Since the entries are distributed and cryptographically sealed, falsifying them in a credible way or destroying them to conceal activity is practically impossible.
Example
A Look at the above example gives us clear picture that to the regular double entry transactions of two parties A & B are recorded jointly into a blockchain as a third entry. The digitally signed third entry/receipt dominates the two entries of double entry because it is exportable, independently verifiable, and far easier for computers to work with.
Having a ledger that easily shows the entire string of related transactions would not only provide excellent audit records, it would allow both parties to a transaction to have real-time status updates. Every time the blockchain is updated with a new record, both parties to the transaction are able to immediately see the update. There by eliminating huge of amounts of resources & time incurred by organisations in reconciliation of ledgers between suppliers/vendors.
Since implementation of ERP on Blockchain would require huge efforts in helping the businesses migrate from their isolated systems. Our team has decided initially to create a platform which incentives such migration, upon detailed market study we have come to a conclusion that Invoice Financing through Decentralised Finance Structure, would be huge step forward in our vision to create of a common distributed ledger for all businesses to interact and operate.
Copy link