Question

Some people believe database technology may eliminate the need for double-entry accounting. This creates three possibilities: (1) the double-entry model will be abandoned; (2) the double-entry model will not be used directly, but an external-level schema based on the double-entry model will be defined for accountants’ use; or (3) the double-entry model will be retained in database systems. Which alternative do you think is most likely to occur? Why?

Answer 1

Alternative 3 is most likely to occur: the double entry model will be retained in database systems as double entry is the base of accounting without which it is not possible to keep the track of transactions.

The double-entry accounting system’s primary benefit is its self-checking nature; for every action in one account, there must be an equal but opposite effect in another account. This allows for comprehensive record keeping. Double-entry accounting also allows for accrual based accounting which properly accounts for credit – something that single entry accounting cannot handle as well.

The obsolescence of double entry accounting would also imply the obsolescence of certain financial statements as these statements of accounts rely on double entry accounting for usefulness. The main issue is being able to trace the movement of resources of an organization without making equal and balanced entries. When a payment is made for inventory, simply recording two transactions without making the obvious linkage to the two accounts seems imperceptible. For this reason, databases will continue to use the double-entry accounting system even in abstraction for user purposes.