The AI revolution has made accountants' jobs easier. It has reduced the need for more employees to carry out accounting roles. For the double-entry principle, postings of transactions can be automated using AI. Will this innovation bring an end to double-entry?
Benefits of AI to double-entry principles
Precision: With Artificial Intelligence, posting double entries is more precise. You can simply tell the AI agent attached to the software to post a transaction for you by giving a simple prompt.
Reduce errors in posting: This is related to precision. As transactions are posted into their respective accounts more accurately with AI, errors are reduced. Errors such as compensating, commission, overcasting and undercasting errors are avoided.
Detecting errors: AI can detect errors faster compared to humans. It will reconcile accounts and ensure accuracy. Thereby improving the integrity of the financial statements.
Automate postings: With artificial intelligence, posting business transactions can be automated. Also, reconciliations of accounts are automated. The Agentic AI attached to the software is instructed on what to do with a prompt. And it does it without human intervention.
Knowledge of double entry: With LLM AI, a prompt can tell you the double-entry postings for a transaction. Therefore, you need little knowledge of the double-entry principle.
Relevance of double-entry in an AI world
Despite the use of agentic AI in posting transactions in accounting software, the double-entry principle remains relevant today. A prompt in an LLM artificial intelligence, like ChatGPT, to state the double-entry principle for a particular transaction does not mean it will be correct at all times.
Artificial Intelligence might hallucinate. Therefore, the AI user must have sound knowledge of the double-entry principle. More so, a novice in accounting cannot write a better prompt like a professional. To use AI effectively, the user must understand the fundamentals of the accounting profession.
When there is a software failure, it might be impossible to use artificial intelligence to post transactions. It is the fundamentals that will help the accountants to post them manually. If the accountants fail to remember the principle, it might be difficult to do the right postings.
It is always required that the user recheck the result provided by artificial intelligence. This ensures that the accounts are balanced. In many cases, a control is integrated into the system. Therefore, if the control (for example, the trial balance) is imbalanced, it implies that the result from the artificial intelligence is inaccurate.
In conclusion, the double-entry principle remains relevant in the AI race. Professional accountants should know this principle. This will help keep the fundamentals in mind while relying on artificial intelligence to automate and work faster.