Even though there are two ways to record financial transactions—double-entry and triple-entry accounting—the two accounting procedures are very different. A good accounting system is necessary for a firm to run smoothly and to keep financial information organised.
The double accounting procedures have persisted in use for decades even though there are many other accounting systems from which to pick. However, use of triple-entry accounting has only just begun to pick up steam. When deciding whether to outsource their finance and accounting, many business owners still frequently become confused between the two.
Understanding Double-Entry Accounting Systems
Despite the fact that accounting procedures remained unchanged for centuries, the double-entry system was originally introduced in the 13th century. The process of recording financial transactions that entail two accounts for each transaction is known as double-entry accounting. Account executive in India commonly follow it as it is known and very much coherent.
Luca Pacioli developed double-entry accounting, a rational system for maintaining financial records that is founded on the duality concept, in 1494. Each transaction has an immediate impact on two different accounts. A credit is given to one account, while a debit is sent to the other.
The double-entry system is exact and thorough due to its dual effect. It follows commonly known accounting standards, and a detailed interface tracks every transaction. The preparation of the financial statements follows the preparation of the ledger, diary, trial balance, and source documents.
Fraud and theft are less likely since this system provides an exhaustive log of financial transactions. The dual feature makes it simple to spot inadvertent errors and make the necessary corrections to accounts.
1. Significantly reduces error
Human mistakes have the potential to affect a company's financial situation. This is less likely, though, because double-entry accounting provides checks and balances. Errors are simple to see in double-entry accounting since the debit and credit amounts are equal. Errors have decreased, but not been completely eradicated.
2. Establishes a paper trail
The use of double-entry accounting lowers theft by providing an audit trail to an account executive in India. The general ledger transactions that are uploaded can be followed via audit trails. If your cash amount on your balance sheet looks to be abnormally large, you may check the accuracy of the cash account transactions by looking into them.
3. Financial statement preparation
Accounting information is easy to compile in businesses that employ double-entry bookkeeping since data is immediately gathered from the transactions. Companies need to create accurate financial accounts quickly and effectively. Management uses financial statements to assess the financial health of their organisations and to develop budgets.
Understanding Triple-Entry Accounting System
Triple entry accounting is a novel method of accounting that is based on the scholastic notion known as the 3E Accounting System (or 3E). It first appeared as a concept in the 1980s, but it only really took off when Ian Grigg connected it to blockchain technology.
This approach takes care of the majority of the problems that double-entry accounting does not cover. It's a high-level accounting system that is trustworthy and accurate. Triple entry accounting includes connecting all stakeholders to the accounting process through a smart contract and cryptographically safeguarding them all.
The third entry in the Triple Entry System is an invoice and a transaction that is added to the Blockchain. It serves as evidence of a transaction between the two parties, using the double-entry technique, and each side has a receipt.
Triple-entry accounting records are transmitted and encrypted using cryptography, making it almost impossible to delete or replicate them. A buyer registers a credit in the account for each dollar spent. While sellers document cash payments as a debit in two distinct accounting books.
Instead of writing entries independently in several journals, blockchain technology overcomes this issue by recording transactions across wallet addresses in the same shared database. This results in an interconnected network of objective and permanent accounting records. A 3E accounting system has several benefits, including openness, audits, and integrity. Most of the finance manager jobs in Bangalore demand such professionals who are well-versed with this accounting system.
Benefits of Triple-Entry Accounting system
1. Decentralized control
As the data is distributed to all associated hosts, the jurisdiction is no longer confined to one hand. As a result of everyone having equal access to the data, it is decentralised, consistent and trustworthy across businesses.
2. Perfection
The likelihood of an error or misunderstanding between two parties is decreased since the data is still connected to all affiliated businesses. Data input is hence more accurate and less prone to mistakes and omissions.
3. Electronic contracts
When all the conditions are met, the electronic contract software is set up to function. As a consequence, connected actions—like payments—only happen automatically if a matching trigger gives its approval. More double-data-entry systems will eventually be replaced with triple-entry accounting, a far more dependable and sophisticated technology.
Final words
We have discussed the benefits of both kinds of accounting. We hope the understanding of both accounting systems is clear. A finance manager job in Delhi is looking for those individuals who can perform as per the accounting requirements. If you are looking for a capable account executive in India, then you must hire them now!
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