In the field of accounting, blockchain technology means a better experience when it comes to the transfer of ownership of assets and maintaining a ledger of accurate financial information. Additionally, it can be used to record transactions between parties in a verifiable, secure, and permanent way.
Blockchain also offers smart contracts, which are agreements that can be automatically executed when certain conditions are met, without the need for human intervention. The technology is being used in multiple industries to record and track transactions, but it has the potential to be applied to accounting as well.
Blockchain offers the potential for companies to reduce costs by simplifying recordkeeping and traceability. A digitalized record of all the transactions between firms would decrease the monitoring cost of tax authorities, banks, courts, and auditors.
Blockchain technology can impact the accounting world mainly in three different ways. Here they are.
- No more cooking of the books
The technology behind the blockchain makes it possible for a network of users to cook the books by registering faulty transactions on a shared public ledger. The data is stored in blocks that are linked together and secured using cryptography, making information tamper-proof. Each block contains an encrypted hash of the previous block, which links it securely to its predecessor. This means all entries are distributed and cryptographically sealed, making data manipulation impossible.
- New mechanism of bookkeeping
Currently, the accounting bookkeeping concept relies on double entry bookkeeping. In this method, every entry or transaction is recorded in two separate accounts. The blockchain technology will add a third layer to it. All the transactions will be uploaded on the electronic ledger and all the involved parties will be able to verify the transaction through blockchain. The current bookkeeping method will be changed significantly.
- Impact of blockchain technology Auditing
According to a survey on the impact of blockchain technology on the auditing profession on the auditing profession conducted by Geneva School of Business Administration, percent of the respondents believe that introduction of blockchain technology will change their roles. Moreover, 62% of the respondents feel that the reliance on IT will significantly increase and the main objective of the auditor’s job will move from ensuring regularity of the firm’s financial statement to ensuring that blockchain technology is properly set up and deployed.
Blockchain in Accounting in Action
The Big 4, the world’s four largest accounting firms have been experimenting with blockchain to see how it can be useful for their business. They’ve found some promising applications and expect that this technology will revolutionize many aspects of traditional services in coming years!
Here’s how each of these companies is utlizing blockchain in accounting.
As one of the world’s leading consulting firm, Deloitte established Rubix in 2014 to help clients with their digital transformation goals. They offer advisory services and develop distributed applications for various industries including the government sector.
PwC believes that blockchain has huge potential in the financial services industry. In January 2016, they hired 15 top technology experts to form a new global team and have since worked with many companies across industries such as banking & commerce who are looking into how best this revolutionary tech can help them expand their businesses online or off of course.
KPMG, one of the largest accounting firms in America has introduced its Digital Ledger Service which provides “complete lifecycle support–from strategic qualification and business case creation through applicable use-case development” for companies looking into blockchain’s potential benefits.” Microsoft’s Blockchain as a Service (BaaS) technology is backing KPMG’s blockchain endeavor.
EY is the first well known advisory company in the world to accept crypto (Bitcoin) as payment for its services (at certain locations). For example, Swiss Clients of EY, have been able to pay their invoices for audits and advisory services with Bitcoin since the start of 2017.
The Future of Accounting
The world of accounting is undergoing a major change with the introduction and implementation into practice of Blockchain. As such, it’s important that future accountants and firms are well prepared for what comes next by understanding how this new technology works in tandem with their current profession!
Peerplays is an open-source blockchain that provides the fastest, most decentralized network consensus model available today. Peerplays is built with Graphene technology and Gamified Proof of Stake (GPoS), bringing a new paradigm of fairness, trust, speed, and security.
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