gundyc_ACT425-1_mod8 Portfolio Project

Triple entry accounting is a new system that aims to improve the accuracy and transparency of financial records. It adds a third element called Trebits to the traditional debit and credit system. Blockchain technology is seen as a potential solution for implementing triple entry accounting because it provides a decentralized and transparent ledger. Blockchain eliminates the need for intermediaries in digital transactions and ensures the integrity of the records. However, blockchain technology is not without its flaws, such as the volatility of cryptocurrencies and the reliance on others adopting the system. Despite these challenges, more companies are investing in blockchain technologies for the future of their businesses. The integration of blockchain technology into accounting information systems has the potential to revolutionize the auditing process, but it still needs to prove itself on a practical level. Single entry accounting has existed for thousands of years as a simple way for one person to keep track of their finances. However, because of the one-sided nature of single entry accounting, the accuracy and transparency of records maintained with the single entry method were questionable at best. Double entry accounting attempts to correct the flaws of single entry accounting by maintaining ledgers for incoming and outgoing finances. Instead of simply recording a transaction as it occurred, accountants were not able to justify and balance transactions between accounts in their contract accounts. However, this system is far from flawless. Double entry accounting is still susceptible to manipulation and has inherent transparency issues. For shareholders or government agencies, they require independent auditors to verify the integrity of the financial information. A new system that publicly and permanently records financial transactions and their information while preventing manipulation and fraud is needed to promote transparency and trust within financial recording. The next step in the financial record-keeping evolution is triple entry accounting. Triple entry accounting was first introduced by accounting scholar Yuji Iruji in 1986 as he proposed that a third element be added to the debit and credit system called Trebits. Trebits would theoretically be a new set of accounts meant to explain changes in income and would provide more financial information for an organization to make better decision making. Since the introduction of the concept, triple entry accounting has evolved to take on a slightly different meaning. Financial cryptographer Ian Griggs then proposed in 2005 that the receipt is the transaction, meaning that a financial cryptograph digitally signed between two parties can be viewed by a third entry, avoiding fraud and reducing redundancies in financial reporting. Essential to the foundation of triple entry accounting is the need for transparency and accountability within financial record-keeping. New developments in technology may allow for triple entry accounting to become a reality and in turn create a new era of fully transparent accounting. Blockchain technology may be the solution to triple entry accounting implementation. Blockchain technology refers to a set of cryptographically linked data blocks that provide access to the entire history of transactions performed through a decentralized ledger. Blockchain essentially eliminates the need for intermediate organizations when digitally exchanging currency. The technology is structured on a peer-to-peer network, meaning that it is not dependent on a central authority. For example, if you wanted to transfer money from your bank account to somebody else entirely digitally, you would have to interact with at least one intermediate authority to do so. Either your bank or a third party application would want to verify the transaction. Blockchain would instead allow you to directly and digitally transfer that money through a cryptocurrency while still maintaining an accurate record of the transaction that could be viewed by anyone. Blockchain technology does not require a central authority because it operates on a decentralized operating system called proof-of-next-port to prevent itself. The system is decentralized, meaning that no one person or organization has access to control the transfer of currency. Every transfer is recorded and the information for that transaction is stored and encrypted across the entire system, meaning that no one computer will house the information for one transaction. When implemented into the triple-entry system, the blockchain is able to link two separate double-entries together and can be verified externally. The system removes the majority of human elements and changes for human error or attempts at fraud. Once an entry has been recorded, there is no method of editing, altering, or removing the entry, and the inherent encryption built into a transaction deters manipulation or external alteration. Removing the possibility of manipulation would heavily reduce the need for internal controls within the financial recording process and would provide an easily accessible and traceable history for auditing purposes. Blockchain has the potential to revolutionize accounting methods and the auditing process. However, like any new technology system, blockchain technology is not without its faults. The major start of blockchain technology is its ability to transfer cryptocurrencies and provide an alternative financial payment method to traditional cash and card methods. The cryptocurrency industry has been struggling at the late, marred by multiple fraudulent scams and historically low values. Towards the beginning of its life, cryptocurrency was known for its volatility and constant fluctuation. While the currency may have stabilized in recent years, financial regulators have continued to go after fraudsters like Sam Bacon Fried. The founder of cryptocurrency exchange company FTX has been charged with criminal fraud after the company went bankrupt last year despite being valued at $32 billion at the start of 2022. And while cryptocurrencies are not all that blockchain technology has to offer, another downside of this technology is that it is entirely reliant on others adopting the system. Without other accounts to transact with, blockchain users can do little else. A few triple entry blockchain projects already exist. Request Network, Fiscal, and Legerium to name a few. More and more companies in multiple industries are beginning to invest in blockchain technologies as the future of their business. However, the future of those projects is uncertain as current regulations surrounding blockchain technologies have yet to be fully established and the majority of policymakers are hesitant to allow blockchain and cryptocurrencies to run wild in the wake of recent scams. Blockchain is a new technology, but it is built on the back of older and better established technology to provide a new ledger system that promises increased transparency and security. Integration of blockchain technology into business practices may be the future of accounting information systems, but it has yet to prove itself on a practical level.