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Difference Between Double Entry Accounting and Event Based Accounting

In: Business and Management

Submitted By Tyrel2
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Over the last 500 years, the double-entry system of accounting has provided the accounting profession with a reliable and accurate way of tracking the economic events of companies. However, with the implementation of computer-based accounting systems over the last few decades, event based accounting has gained popularity. The theory behind event based accounting is that each business transaction can be broken down into one, or a combination of three types of events: economic, business, and information. An economic event is one in which the quantity of resources change, such as selling an item or purchasing a service. Events like receiving an invoice from a supplier, or sending out a purchase order to a vendor are examples of business events. They are necessary to the company even though they are not the monetary or physical transactions for goods or services. Tasks like creating reports and inputting new customers are considered information events. Information events provide the necessary data for the economic or business events that transpire. The double-entry system of accounting focuses on taking those separate events and aggregating them into journal entries. By aggregating them, a great deal of the total information of the event is left out. Under an event based accounting system each event is recorded with as much of the information as possible, and then stored in tables of data that allow the user to recall and compile this information into usable reports. This allows the company to use all of the information from prior events to better predict future events and manage the business. The usefulness of an event based accounting system is greater than a double-entry system because the additional information can be used throughout all aspects of the company and not simply the financial side.
Although the double-entry system of bookkeeping will continue to be an integral part of an accountant’s training and background, event based accounting systems will continue to dominate the real world applications within the profession.

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