The Different Types of Accounting

The Different Types of Accounting

By Abigail McCullough

The History of Accounting

Accounting is a method that dates back thousands of years and has been used in many parts of the world for a variety of tasks. The earliest evidence of accounting comes from the Mesopotamian civilizations about 7,000 years ago, as they kept records of the goods that were traded and received between themselves and other civilizations. Luca Pacioli was an Italian mathematician and an early contributor to the field of accounting. He is referred to as the “Father of Accounting and Bookkeeping” because he was the first person to publish work using the double-entry system of accounting. 

Single-Entry Accounting

Single-entry accounting is a method of tracking a business’s assets, liabilities, income, and expenses, recording each transaction one single time. For example, if a business makes a sale to a consumer, the expense for the item will be recorded when the company purchases it and the income is recorded when the business sells the item to the consumer. Single-entry accounting lists a business’s income and expenses in a single row, hence the name, with positive values for income and negative values for expenses. 

Double-Entry Accounting

On the other hand, double-entry accounting records a business’s transactions twice, as corresponding debits and credits. With the double-entry method, every transaction affects two accounts at the same time. One account receives a credit, while the other account receives a debit. For example, if a restaurant buys a set of tables for $5,000, that would be recorded as a debit in the restaurant's account for $5,000. The furniture company that the restaurant bought the set of tables from would receive a credit to their account for $5,000, as that is the corresponding and opposite entry for the restaurant’s debit. The total of all debits and credits in double-entry accounting must balance out, as there should be equal amounts taken and received from the different accounts. 

Triple-Entry Accounting

Triple-entry accounting, also known as 3E accounting, was first proposed by Professor Yuji Ijiri in 1986. Triple-entry accounting builds off of the double-entry accounting method by introducing a third-party entry for each transaction. This third-party entry comes in the form of a cryptographically secured digital receipt that is recorded on a decentralized ledger. This digital receipt gets entered into a blockchain, making it nearly impossible to erase or copy. The main rule with the 3E accounting system is that there must be three entries, consisting of the debit entry, the credit entry, and the blockchain entry. Continuing on with the example used in double-entry accounting, a restaurant buys a set of tables for $5,000, showing a debit in their account, while the furniture company receives a $5,000 credit in their account for their sale. The third-party entry would be a cryptographic receipt of the transaction between the restaurant and the furniture company, creating a blockchain that records the details of the transaction and acting as proof of it.