Blockchain Fintech

Can Blockchain Transform Traditional Accounting?

Blockchain Transform Traditional

Blockchain is basically a digital register which records every transaction in chronological order. Such transactions are visible to anybody.

Be it a person representing a fintech, or somebody associated with a high-tech company, they all love to talk about blockchain. Common men understand blockchain through cryptocurrencies. For them, everything about blockchain starts with bitcoin.

However, unlike the popular belief, blockchain is not just about bitcoin. Its scope is much wider. And one of the most suitable for the implementation of blockchain business processes is accounting.

Scientific literature and media rarely mention accounting when they talk about blockchain. But blockchain’s very essence depends on accounting technology.

Like classical accounting, double entry is also a norm in blockchain transactions. Like traditional accounting, a blockchain transaction also debit of one and the credit of another account.

Why Blockchain Is Important For Accounting

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  1. In traditional accounting practice, only one person controls “double entry”
  2. Traditional accounting tends to commit many mistakes. Some of these mistakes are nothing but inherent fault of the practice. And some of them are done deliberately. Most often we hear about under delivery of account transactions.
  3. Change in transactions in the traditional accounting system can always happen.
  4. Traditional accounting practice is not so transparent. Some transactions are deliberately hidden.

Big Four accounting corporations are seriosuly exploring the possibilities of using blockchain in accounting.

Will there be a no role of an intermediary when blochain becomes a part of accounting. It is too early to say so. But many predict that auditors will not become extinct, but their role will change.

Soon, we may have a new accounting policy wherein audtors job will be to confirm classifications in accounting.

Blockchain Principles In Accounting

  • Once blockchain is integrated into traditional accounting practice, accounting will be more decentralized
  • Anyone can store any data
  • Practice of maintaining data will be more transparent. Within the framework of access rights, all participants can access data.
  • No external force can change private blockchain
  • Blockchain will make it impossible to change data that have been entered. Irreversibility of transaction will make the practice more transparent.
  • Whenever somebody enterers some data, it will be known to all participants.

Possible Areas Of Application Of Blockchain Technology In Accounting

  • Settlements with external counterparties: Blockchain will do away with the practice of confirming the details of the transactions.
  • The movement of assets within the enterprise: The work of the accountant here will be reduced to the correct classification of the received values and the formation of the value of the accounting object
  • Real-time operational accounting: Yes, Blockchain will make real time operational accounting possible. One will not have to wait for the accountant to process the primary account.

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