Digital Accounting Protocol
We have solved one of the main problems of modern business, which almost everyone engaged in any activity faces. Namely, no one can understand why they have to pay taxes when they haven't received any revenue. Some even think this is done intentionally.

However, the problem lies elsewhere.


Technical Aspect

The fact is that the modern tax system is derived from the current accounting system. The latter has two major flaws, which manifest as follows:

  1. The transfer of an asset to the buyer is recorded in accounting as the receipt of an asset from them.
  2. The receipt of an asset from suppliers is recorded in accounting as an expense.

Both of these actions are applied regardless of whether payments were made or not.

In the first case, tax liability increases, and in the second, it decreases. This tax liability is a derivative of the sum of the transferred assets. Ideally, it should be the opposite.


How did this happen?

We solved this problem. In solving it, we found the answer to this question, which turned out to be quite simple.

Accounting was previously done manually, on wooden abacuses or with pen/pencil on ledger sheets. Therefore, simple rules and simple accounting entries were needed. These simplified accounting entries were used for hundreds of years and later transferred to computer programs.

In the age of computers, this problem is solved very easily. To solve the problem mentioned above, it is necessary to make up to a dozen entries for processing a single simple monetary transaction. Doing this manually is unthinkable. But with automation, it is easily accomplished. A computer doesn't care if it makes one entry or thousands; the main thing is to have the correct algorithm.

For this, the computer needs a special protocol: the Digital Accounting Protocol (DAP), which we developed in the process of creating our accounting software for optimal integration with AI tools. Without DAP, AI will never be able to correctly distribute entries according to the chart of accounts.

The TCP/IP protocol solved the problem of precise information transmission at the speed of light. Even from interplanetary spacecraft, we receive accurate photographs. The DAP protocol solves the problem of precise accounting. Accounting 2.0, which with 100% accuracy provides a picture of the financial state of an economic entity at any given time, "pixel" by "pixel," like digital photographs thanks to TCP/IP.

We have already implemented this in the code of our accounting software, Arvut AI Accounting, which can calculate using both the old and the new methods.

It is obvious that in the near future everyone will switch to Accounting 2.0. There can be no other way. Just as it is unthinkable now to revert to analog methods of information transmission, it will be unthinkable to revert to current accounting.

Legal Aspect

In legal documents in almost all countries, the following is written:

Revenue: The shipment of goods is considered revenue at the moment the company fulfills its contractual obligations to the buyer, i.e., transfers control of the goods to the buyer. This principle is called revenue recognition.

Expenses: The acquisition of assets (such as goods or materials) from suppliers is recognized as an expense at the moment of receipt if it concerns inventory that will be used or sold in the ordinary course of the company's business.

In fact, businesses are forced to recognize as revenue what is not essentially revenue. On the other hand, businesses are allowed to recognize as expenses what is also not essentially an expense.

All these definitions contradict common sense, create room for manipulation, and increase the burden on tax authorities to combat these manipulations. This also causes confusion in the Integral Accounting System, distorts overall statistics, and requires significant resources for system management, control, and maintenance.

Everyone loses because of this: the state and all businesses, which ultimately affects all consumers and taxpayers.

The root of all these problems is the current accounting rules, from which the entire tax system is derived.

The state is forced to compel its citizens to recognize giving as receiving, allowing them in return to recognize receiving as expenses.


Do I have the right to refuse and not recognize what is imposed if it contradicts common sense?

Obviously, if I remain silent, I naturally accept it.

Perhaps I have the right to follow common sense? Maybe I just need to write a statement, something like the following:

I, Alexander Kheylik, declare the following:

  1. Expenses: I undertake to recognize expenses for acquiring assets only after their actual payment.
  2. VAT: I refuse to include in my accounts the VAT that I have not yet paid.
  3. Revenue: I will recognize revenue only after the actual receipt of payment for the goods sold and services provided.
  4. Taxes: I undertake to pay taxes based on the above points 1, 2, and 3.

Will all this be within the limits of the fundamental laws and the Constitution?

There is every reason to believe that, in the end, people will have additional motivation to produce more goods and provide more services. To perform trial work, to let people try their products and services. It is their right to do good and provide people with value! Sometimes for free. It is in their interest to receive monetary rewards for this.

Again, old accounting was geared towards manual processing with wooden abacuses or pen/pencil and paper journals. But if tools have emerged that allow us to move to a new level of accounting—more accurate and transparent—then it is necessary to switch to them. Everyone is interested in this: both citizens and the state that serves them.

Are you for the transition to Accounting 2.0? Write to us.


Best regards,
Alexander Kheylik
al@arvut.ch
June 15, 2024

P.S. If you are interested in this matter, may I invite you to also read this document: Accountant Robot.
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