Double Entry System
In Midaz, every financial transaction involves two corresponding entries, ensuring accuracy, transparency, and control in financial reporting.
What Is the Double-Entry System?
The double-entry system operates on a simple yet transformative principle: for every transaction, there are two corresponding entries—a debit and a credit. This framework ensures that all financial activities are recorded holistically, providing a complete and balanced view of your accounts.
Each transaction impacts two accounts, maintaining equilibrium in the financial ecosystem:
- Debits reflect the value received or resources consumed.
- Credits indicate the value given or resources provided.
Together, they form the foundation for reliable financial insights, empowering businesses to make informed decisions.
Benefits
Financial independence begins with clarity, and the double-entry system offers exactly that:
- Accuracy: Every transaction is cross-verified, reducing errors and fostering trust.
- Transparency: A complete record of debits and credits ensures clear visibility into your finances.
- Control: By understanding how each transaction affects your accounts, you gain greater command over your financial operations.
For organizations leveraging Midaz’s advanced transaction capabilities, the double-entry system seamlessly integrates with our architecture. Our platform ensures that every debit and credit is automatically tracked and balanced, streamlining your financial processes.
How Does it Work?
Consider this example (figure 1): you perform a transaction to transfer R$1000 from one account to another. This process will have two operations:
- one operation to debit R$ 1000 from the source account.
- one operation to credit R$ 1000 to the destination account.
Figure 1. Example of the Operations in a transaction to transfer BRL 1.000,00.
In Midaz, these entries are automatically captured, ensuring precision and alignment with your financial strategy. Our platform’s intuitive design enables you to view and analyze these movements effortlessly, promoting a culture of financial autonomy.
Inflows and Outflows
Midaz uses a double-entry ledger system where all external account interactions (inflows and outflows) are handled through the external account of the Asset (@external/{{assetCode}} ), which represents the link between Midaz and external transactions.
Example Scenario: A PIX transfer from Account A (which is part of the Ledger) to an external BRL account.
- Source:
@accountA - Destination:
@external/BRLaccount
The Ledger entries for this transaction are:
| Source | Destination | Amount |
|---|---|---|
| @accountA | @external/BRL | BRL 1000 |
| @external/BRL | @accountB (Bank B) | BRL 1000 |
Here, BRL 1000 is moved from Bank A’s account to @external/BRL for the outflow. Once the transfer is processed via SPI (PIX system), Bank B credits the funds to the recipient’s account.
Notes
@external/{{assetCode}}can have a zero or negative balance but should never be positive.- This account's balance will always equal the negative of the combined balance of all ledger accounts.
Transforming Financial Management
At Lerian, we believe the double-entry system is more than a method—it’s a mindset. It’s about building trust, embracing accountability, and empowering organizations to thrive in an ever-evolving financial landscape. By integrating this proven system with our forward-thinking tools, we invite you to redefine what’s possible in financial management.
Let Lerian and Midaz guide you towards precision, clarity, and the independence to transform your financial future.
Updated about 3 hours ago