Evolution of accounting

Accounting has been estimated to be in existence for about 7000 years, to put that time frame into perspective it is as old as when Aristotle put the theory of Earth being spherical in shape. Single Entry Accounting was considered to be one of the earliest adoptions of accounting methodology. It was a simple, easy-to-maintain system since it was a one-sided accounting system, Cashbook can be considered a perfect example of this method, but it was hard to validate or evaluate its accountability on the other hand. As a result, over time, the man understood that the accounting procedure required more transparency and accountability.

The disadvantages of Single-Entry Accounting prompted the search for a more comprehensive structure, which resulted in the development of Double-Entry Accounting. This new form was created about 600 years ago with the motive of making accounting more fulfilling. As a result, instead of keeping one ledger, the accountant now keeps two: one for arriving and one for departing transactions.

Despite the fact that the Double-Entry Accounting technique of bookkeeping was far more refined and practical than Single-Entry Accounting, it too had problems. The records were separate since there was no interconnection between the multiple sets of Books, thus they lacked transparency and were impossible to check. As a result, there is a significant trust gap between various stakeholders, such as investors, lenders, and/or the government. Due to the inadequacies and shortcomings of Double-Entry Accounting, an economy-wide financial reporting system was required, one that would aid in the elimination of massive quantities of administering and pave the way for a flawless and efficient accounting system.

As a result, Triple-Entry Accounting is a leap forward from traditional Double-Entry Accounting, relieving bookkeepers and businesses of time-consuming troubleshooting and assisting in the elimination of mistrust, frauds, and manipulations. Triple-Entry Accounting, a unique concept devised by the late Yuji Ijiri, a professor at Carnegie Mellon University, gives a framework for a novel and difficult manner of performing accounting. The concept gained traction in recent years because of Ian Grigg, who popularised it by associating it with blockchain technology and arguing that bookkeeping should no longer be fully private. Simply stated, blockchain is a digital record that is spread across numerous places to ensure worldwide security and accessibility. This technology is currently primarily utilised for bitcoin and other cryptocurrencies, and it has just recently penetrated accounting operations, but domain experts believe it is only a matter of time before it completely disrupts accounting processes. Blockchain is the consistent theme or binding component that connects the books and aids in the connection of two independent double entries. It can also be seen for internal and external audit purposes.

All accounting entries in the Triple-Entry Accounting system are cryptographically protected by a third entry, acting as a disincentive to manipulations and financial fraud. In traditional Double-Entry Accounting, any weak human link, such as an employee, a bookkeeper, or even an auditor, might jeopardise a company’s ledger. However, because it is immutable, this unique system of Triple-Entry Accounting eliminates the possibility of any corrupt or weak human connection.

Since blockchains are totally automated and decentralised, an entry cannot be edited, amended, or erased once it has been recorded. The greatest level of encryption technology secures the integrity of each transaction, which is digitally signed, leaving no spaces for errors, and is also verified by all parties involved. Triple-Entry Accounting is a reasonable option for reducing mistrust and skepticism and regaining stakeholders’ trust and faith in businesses. As a ledger that shows the whole string of transactions, whether invoices issued or paid, etc., the Triple-Entry Accounting system has undeniable advantages, and it would make an outstanding audit record. Sooner or later, there is going to be wide adoption of this technology.

Another technological evolution we see is Cloud Computing, which is a big technological development. The constant updating of information is a significant benefit of a cloud-based system, allowing accountants and clients to examine complex data based on the most up-to-date information. When data on the system is updated, cloud-based software can also ensure continuous monitoring, rather than the sporadic analysis we do today.  According to Forbes, cloud computing is booming as new sophisticated technologies like Machine Learning (ML) and Artificial Intelligence (AI) are integrated into the cloud. The future of accounting appears to be cloud-based since these technologies become increasingly ubiquitous.

Lastly, the technological take-over is considered to be how strong ML and AI have made themselves with developments taking over the years. The role of Auditing, taxation services, banking, are just a few of the labor-intensive aspects of accounting that are soon becoming totally automated. As AI is used to construct self-learning systems, technological systems can take over the monotonous and time-crunching duties, leaving humans to handle the analytical and administrative responsibilities. According to Forbes, major software suppliers such as Intuit, Sage, OneUp, and Xero offer automated data entry and reconciliation alternatives in company bookkeeping using AI and ML technologies. According to the CPA Journal, another scenario is the use of Robotic Process Automation (RPA) to shorten audit and contract processing times from months to weeks. Larger companies that use RPA AI integration have “improved efficiency and higher-level services” compared to below-level competitors. This technological progression holds the future every professional is heading toward and it is important to upskill at every stage.

By Aryan Manwani

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